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1. Determine the group structure: Identify the parent company and its subsidiaries, and establish the relationships between them.
2. Identify the subsidiaries to be consolidated: Determine which subsidiaries should be included in the consolidated financial statements.
3. Prepare the consolidated financial statements: Combine the financial statements of the parent company and its subsidiaries into a single set of financial statements, using consistent accounting policies.
4. Eliminate intragroup transactions and balances: Adjust the consolidated financial statements to eliminate any transactions or balances between the parent company and its subsidiaries.
5. Prepare and present the consolidated financial statements: Present the consolidated financial statements in accordance with IFRS, including a consolidated statement of financial position, a consolidated statement of comprehensive income, a consolidated statement of cash flows, and accompanying notes.
In Cyprus, companies are required to prepare and present consolidated financial statements if they are a parent company in a group. The requirements for consolidation of financial statements under IFRS in Cyprus are set out in the Cyprus Companies Law, the Cyprus Securities and Exchange Commission's (CySEC) Directive DI144-2007-06 of 2012, and the International Financial Reporting Standards (IFRS).
According to the Cyprus Companies Law, a parent company is required to consolidate its financial statements with those of its subsidiaries if it has control over those subsidiaries. Control is defined as the power to govern the financial and operating policies of a subsidiary so as to obtain benefits from its activities. In addition to the requirement to consolidate financial statements, parent companies in Cyprus are also required to prepare and present a consolidated management report that includes a description of the group's business activities, its performance and position, and the principal risks and uncertainties faced by the group. The consolidated management report must also include a fair review of the development and performance of the business and the position of the group, together with a description of the principal events and risks and uncertainties facing the group.