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IMPROVING THE PREPARATION OF CONSOLIDATED FINANCIAL
STATEMENTS OF FIXED ASSETS IN THE DIGITAL ECONOMY
Mamarasulov Diyorbek Alijon ugli
Doctoral student of Fergana Polytechnic Institute, Uzbekistan
diyorbek@poscointltex.com
Abstract:
This research article explores the implications of consolidating fixed
assets in Uzbekistan’s evolving economic landscape, with a focus on enhancing
transparency and accountability. By leveraging digital technologies and adopting
international best practices, organizations can improve the accuracy, reliability, and
accessibility of fixed asset information. This study investigates the current status of
fixed asset consolidation practices in Uzbekistan, identifies key challenges faced by
organizations, and proposes strategies to enhance transparency and accountability.
Furthermore, it explores the regulatory framework and accounting standards relevant
to fixed asset consolidation in Uzbekistan, highlighting the need for alignment with
international financial reporting requirements.
The majority of the paper is about a
method of consolidation for subsidiary companies using the acquisition method. In
article business combinations were defined in accordance with IFRS 3, IFRS 10 and
IAS 28 and the basic requirements for carrying out the acquisition method were also
examined. New accounting charter has been offered for non-controlling interest
account in charter of accounts by number of 8540.
Ultimately, this article contributes
to the ongoing discourse on enhancing financial transparency and accountability in
Uzbekistan’s digital economy through the consolidation of fixed assets.
Keywords:
f
inancial statements, consolidation, fixed asset, fixed asset
consolidation, subsidiary, associate, IFRS, non-controlling interest, chart of accounts.
RAQAMLI IQTISODIYOTDA ASOSIY VOSITALARNING
KONSOLIDATSIYALANGAN MOLIYAVIY HISOBOTLARINI TUZISHNI
TAKOMILLASHTIRISH
Mamarasulov Diyorbek Alijon o‘g‘li
Fargʻona politexnika instituti tayanch doktoranti
diyorbek@poscointltex.com
Annotatsiya:
Ushbu maqolada O‘zbekistonning rivojlanayotgan iqtisodiy
muhitida asosiy vositalarni konsolidatsiyalashning ahamiyati oshkoralik va
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hisobdorlikni oshirishga qaratilgan. Raqamli texnologiyalardan foydalanish va ilg‘or
xalqaro tajribalarni qo‘llash orqali tashkilotlar asosiy vositalar ma’lumotlarining
aniqligi, ishonchliligi va ulardan foydalanish imkoniyatini oshirishi mumkin. Ushbu
tadqiqot O‘zbekistonda asosiy vositalarni konsolidatsiyalash amaliyotining hozirgi
holatini o‘rganadi, tashkilotlar duch keladigan asosiy muammolarni aniqlaydi hamda
shaffoflik va hisobdorlikni oshirish bo‘yicha strategiyalarni taklif qiladi. Bundan
tashqari, u O‘zbekistonda asosiy vositalarni konsolidatsiyalash bilan bog‘liq me’yoriy-
huquqiy asos va buxgalteriya hisobi standartlarini o‘rganib, xalqaro moliyaviy hisobot
talablariga muvofiqlashtirish zarurligini ta’kidlaydi. Maqolada sho‘ba korxonalarga
kiritilgan investitsiyalarni sotib olish usulidan foydalangan holda konsolidatsiyalash
ochib berilgan. Maqolada biznes birlashuvlari 3-MHXS, 10-MHXS va 28-XBS ga
muvofiq o‘rganilgan hamda sotib olish usulini amalga oshirish uchun asosiy talablar
ham ko‘rib chiqilgan. Buxgalteriya schetlar rejasida nazorat qilinmaydigan ulushlar
hisobi bo‘yicha yangi buxgalteriya scheti 8540 ni ochish taklif qilingan. Natijada ushbu
maqola O‘zbekiston raqamli iqtisodiyotida asosiy vositalar bo‘yicha
konsolidatsiyalashgan hisobot tuzish orqali moliyaviy shaffoflik va hisobdorlikni
oshirish bo‘yicha davom etayotgan muhokamaga hissa qo‘shadi.
Kalit soʻzlar:
moliyaviy hisobotlar, konsolidatsiya, asosiy vositalar, asosiy
vositalarni birlashtirish, sho‘ba, assotsatsiya, MHXS, nazorat qilinmaydigan ulush,
schetlar rejasi.
СОВЕРШЕНСТВОВАНИЕ ПОДГОТОВКИ КОНСОЛИДИРОВАННОЙ
ФИНАНСОВОЙ ОТЧЕТНОСТИ ОСНОВНЫХ СРЕДСТВ В УСЛОВИЯХ
ЦИФРОВОЙ ЭКОНОМИКИ
Мамарасулов Диёрбек Алижон угли
Докторант Ферганского политехнического института
diyorbek@poscointltex.com
Аннотация:
В
данной исследовательской статье исследуются последствия
консолидации основных средств в развивающейся экономической ситуации
Узбекистана с упором на повышение прозрачности и подотчетности. Используя
цифровые технологии и принимая передовой международный опыт,
организации могут повысить точность, надежность и доступность информации
об основных средствах. В этом исследовании изучается текущее состояние
практики консолидации основных средств в Узбекистане, определяются
ключевые проблемы, с которыми сталкиваются организации, и предлагаются
стратегии по повышению прозрачности и подотчетности. Кроме того, в нем
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исследуются нормативная база и стандарты бухгалтерского учета, имеющие
отношение к консолидации основных средств в Узбекистане, подчеркивая
необходимость их приведения в соответствие с международными требованиями
финансовой отчетности. Большая часть статьи посвящена методу консолидации
дочерних компаний методом приобретения. В статье были определены
объединения бизнеса в соответствии с МСФО 3, МСФО 10 и МСФО 28, а также
рассмотрены основные требования к применению метода приобретения. Для
учета неконтролирующих долей участия в плане счетов предлагается открыть
новый учетный план 8540. В конечном итоге, данная статья вносит свой вклад в
продолжающийся дискурс
по повышению финансовой прозрачности и
подотчетности в цифровой экономике Узбекистана посредством консолидации
основных средств.
Ключевые слова:
финансовая отчетность, консолидация, основные
средства, консолидация основных средств, дочерняя компания, ассоциированная
компания, МСФО, неконтролирующая доля участия, план счетов.
INTRODUCTION
In the realm of financial reporting, the accurate representation of fixed assets
holds significant importance for stakeholders, as it reflects the tangible investments
and long-term resources of an organization. In Uzbekistan, as the economy undergoes
rapid transformation and globalization, the need for transparent and accountable
reporting of fixed assets becomes increasingly vital [6]. However, achieving this goal
necessitates effective consolidation practices that align with international standards
while considering the unique characteristics of the Uzbekistan business landscape.
Fixed assets, such as property, plant, and equipment, form a substantial portion
of an organization’s assets and have a significant impact on its financial position.
Consolidating fixed assets reporting involves combining the financial information of
multiple entities or subsidiaries within an organization to present a holistic and accurate
view of its fixed asset base. This consolidation provides stakeholders with a
comprehensive understanding of the organization’s asset value, depreciation, and
overall financial health.
The current state of fixed assets reporting in Uzbekistan faces several challenges.
The existing reporting standards and frameworks may lack clarity and consistency [1-
4], leading to variations in asset valuation methods and disclosure practices. These
inconsistencies limit comparability between organizations and hinder stakeholders’
ability to make informed decisions based on financial statements. Furthermore,
inadequate transparency and accountability in fixed assets reporting can undermine
investor confidence and impede the country’s economic growth.
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The adoption of consolidated fixed assets reporting practices has been widely
recognized as a means of addressing these challenges and improving financial
reporting quality. By consolidating the fixed assets information from various entities
within an organization, transparency and accountability can be enhanced, and
stakeholders can gain a more accurate and complete understanding of an organization’s
financial position. Consolidated reporting also facilitates better decision-making, risk
assessment, and resource allocation for both internal and external stakeholders.
This research aims to explore the concept of consolidating fixed assets reporting
in Uzbekistan and its potential to enhance transparency and accountability in financial
reporting practices. By analyzing the current state of fixed assets reporting in
Uzbekistan and studying international best practices, this research seeks to identify the
gaps, challenges, and opportunities for improvement in the country’s financial
reporting system.
Through a comparative analysis of organizations that have adopted consolidated
fixed assets reporting and those that have not, this research will evaluate the impact of
consolidation on transparency, accuracy, and reliability of fixed assets information. It
will also identify the potential barriers and challenges to implementing consolidated
reporting in Uzbekistan, including resource availability, technological infrastructure,
capacity building needs, and legal and regulatory frameworks.
Based on the findings, this research will provide recommendations and
guidelines for policymakers, regulators, and organizations in Uzbekistan to enhance
transparency and accountability in fixed assets reporting [9]. These recommendations
will focus on improving reporting standards, disclosure requirements, valuation
methods, and implementation strategies, with the ultimate goal of promoting
consistency, comparability, and reliability in financial reporting practices.
By undertaking this research, we aim to contribute to the existing div of
knowledge on financial reporting practices, specifically in the area of fixed assets
reporting in Uzbekistan. The outcomes of this study will provide valuable insights and
practical recommendations for stakeholders, enabling them to make informed
decisions, enhance accountability, and foster a robust financial reporting environment
in Uzbekistan.
LITERATURE REVIEW
Various researchers and scholars have conducted research on the consolidation
of fixed assets, each contributing valuable insights to the field of accounting, finance,
and auditing. Some notable researchers who have explored topics related to the
consolidation of fixed assets include: Prof. Mary E. Barth: Professor Barth has
extensively researched topics related to financial reporting and international
accounting standards, including fixed assets accounting and consolidation, Prof.
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Wayne R. Landsman: Prof. Landsman's research focuses on financial accounting and
reporting issues, including topics related to fixed assets valuation, impairment, and
consolidation, Prof. Robert S. Kaplan: Prof. Kaplan is known for his research on
performance measurement and management accounting. His work often touches on
topics related to fixed assets management and reporting, Prof. Stephen A. Zeff: Prof.
Zeff has researched extensively on international accounting standards and their
implementation, which may include studies on fixed assets consolidation under
different accounting frameworks.
Viktor S.Plotnikov and other colleagues attempted to clarify qualitative
characteristics of consolidated financial statements and specific methods and
techniques of the system of consolidated accounts, which are applied for preparation
of consolidated financial statements, based on consideration of the IASB’s Conceptual
Framework for Preparation and Presentation of Financial Statements.[15]
Article by Kotova K.Yu., and Snigireva O.Yu. outlines and improves the key
points that enable us to assess the effectiveness of the consolidated group's work by
means of reporting analysis based on methods that take into account the specific
features of the individual enterprises entering the study group. In some researches on
preparation of consolidation reports, consolidation and summary report and their
differences are discussed and the reporting methodologies have been studied. [16]
According to Plotnikov V.S the primary purpose is to present the financial
performance and financial position of the reporting entity (the parent company) as if it
were a single entity. Consequently, for accounting purposes, the legal boundaries of
the group’s enterprises are conditionally erased when preparing consolidated financial
statements. The internationalization of capital and its concentration leads to the further
development of collective forms of private property [14].
Mainly foreign economists carried out scientific research on the preparation and
improvement of consolidated financial statements. Among them are E. A. Arens, D. K.
Lobbek, P. S. Bezrukikh, V. V. Kovalev, B. Needles, H. Anderson,
D. Caldwell, V. F. Pali, R. Anthony, Dj. Rees, A. D. Sheremet, V. P. Suits, Ya. V.
Sokolov can be included.
The textbooks, monographs and training manuals created by the economists of
our republic, as well as published scientific articles and theses, only studied the
theoretical aspects of the preparation of consolidated financial statements. For
example, R.D. Dosmuratov, A.K. Ibragimov, A.A. Karimov, Z.T. Mamatov, A.Kh.
Pardaev, M.Q. Pardaev, B.A. Khasanov, K.B. Orazov, N.F. Karimov, B.K.
Hamdamov, I.N. Ismanov [13], B.Yu. Maksudov, H.N. Musaev, A.J. Tuychiev, I.N.
Koziev, Z.N. Kurbanov, K. In the works of R. Khotamov, A.Z. Avlokulov, S.N.
Tashnazarov, the problems of developing the theoretical aspects of financial reporting
are studied.
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S.Nasretdinov and N.Khozhabekov, scientists who contributed to the
improvement of the procedure for drawing up consolidated financial reports in our
republic, laid the groundwork for the scientific foundation of the consolidated financial
report in their dissertations and scientific articles.
It should be noted that the issues of improving the methodology of fixed assets
in consolidated financial statements have not been sufficiently studied by our
economists as a special, scientific research object.
METHODOLOGY
Having analyzed the concept of consolidated financial statements, we conclude
that the scope of this research should determine the contents of consolidated financial
reporting and regard a consolidated group as an economic combination of legally
independent entities, which are recognized as a single business mechanism. This
approach produces the definition of consolidated financial reporting as a set of
indicators reflecting the financial position of entities, which are captured within the
same consolidated perimeter as a single entity, but with separate recognition of titles
of the parent company’s shareholders and non-controlling interests.
DISCUSSION AND RESULTS
The consolidation problem is one of the most difficult areas of theory, analysis,
and reporting policy. Although the first consolidated reports appeared more than a
century ago, they were long overdue as a response to a need for information on a
group’s financial, income, and proprietary position, as well as their legal and
professional regulatory rules. Legislators have permitted a lack of regulatory standards
in the consolidation industry because they do not want to enforce tight and inflexible
norms, and accounting professionals have a dominating opinion that legal
independence of group members is more important than economic unity of the group.
The United States and the United Kingdom were the first countries to legalize
consolidation, followed by countries in Continental Europe.
In economies where there are groups of firms, it is now common practice to
perform consolidated financial reporting. In the previous few decades, preparing
consolidated financial accounts has grown increasingly important. With the growing
association of businesses into groups, and subsequently a more thorough connection of
small and medium businesses beyond national borders, there is a greater need for
national legislatures to unite in the consolidation field.
As a result, the International Accounting Standards Board addresses the problem
of consolidation in all five international accounting standards. After this, there has been
a substantial contribution to the harmonization of European rules and the approach to
the Anglo-American consolidation practice.
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Accordingly, nowadays Resolution of the President of the Republic of
Uzbekistan “On additional measures for the transition to international financial
reporting standards” was published in the official press in February 2020 [2]. From
January 1, 2021, legal entities included in the category of medium-sized organizations
and large taxpayers will organize accounting on the basis of International Financial
Reporting Standards (IFRS) and from the end of 2021, will prepare financial statements
on the basis of IFRS to provide foreign investors with the necessary information
environment and expand access to international financial markets. It means that In
Uzbekistan also accepting consolidation procedures in economic financial reporting
processes [11].
We can examine the group of firms in a narrower and broader sense using the
IAS 27 Consolidated and Separated Financial Statements. The parent firm and
subsidiary companies that belong to the group are referred to as the group in its broadest
sense. The subsidiary companies are those that have a dominant influence, i.e. the
parent company has a controlling effect over the subsidiary company’s business and
financial policy. A control is the ability to manage an entity’s financial and business
policies in order to profit from its operations. In a larger sense, the group includes, in
addition to the parent and subsidiary companies, joint (joint ventures) and linked
enterprises (associates). The associates are individuals who are influenced over but
parent don’t have any control over it. Significant influence entails the ability to
participate in decision-making in an entity’s financial and business policies, but not
control over such policies. The parent business receives 20-50 percent voting rights as
a result of this influence. Joint enterprises are businesses that are managed in tandem
with other businesses in the group, as well as businesses that are not part of the group.
As a result, the strongest link exists between the parent firm and subsidiary companies,
followed by the parent company and associates, and finally the joint ventures. The
International Accounting Standards have been applied logically to this falling series in
terms of correlation degree [12]. The parent company and subsidiary firms are covered
by IAS 27, associates are covered by IAS 28, and joint ventures are covered by IAS
31. The first example below demonstrates how to develop relationships within a group
of businesses.
Example no. 1 -
The firm A holds 80% of the capital stock of the company B,
which includes voting rights at the General Shareholders Assembly. The firm B holds
25% of the capital stock of the company C, which includes voting rights at the General
Shareholders Assembly, and 30% of the company C’s preference shares. The firm B
also has the option to purchase the shares of the company D, which it can do at any
time after receiving a bonus at a market price at the time they were issued, and if it
does, it will get 10% ownership and voting rights in the company D. The company A
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owns 5% of capital stocks with the voting rights and 55% of the preference shares of
the company D. Make determination of the relations character between the companies!
Solution -
The company A is the parent company, the company B is dependent on
the company A, because it owns 80% of capital stocks in the company B. The company
C is the associated company in regard to the company A, while the company A has
indirectly, over its subsidiary company B, 25% of the capital stocks of the company C
(does not take into consideration the preference shares while they provide no voting
rights). The company D is correlated with the company A after investment in the
securities, because the company A has only 5% of the capital stocks in the company
D. The company D is also correlated to the company B after the investments in the
securities, while options on shares which provide 10% of share in the company D, can
use at any time. Further issue of the paper is directed to the complete consolidation, for
which is relevant the group of enterprises in the narrow sense.
The capital investment of one company in another (the parent company in a
subsidiary company and among subsidiary companies) is initially recorded in the
individual balance sheets of the companies involved in the transaction. The company
that invests in the capital of the other company registers the transaction as an asset - a
share in a joint venture. The transaction is recorded as an increase in liabilities by the
company that was invested. In order to make informed decisions about their
investment, shareholders would need to read and interpret the financial statements of
both entities. If there were more than one subsidiary entity this could become quite
complex for shareholders. To this end one set of financial statements is prepared where
the revenues, expenses, assets and liabilities of the parent and subsidiary are combined
for ease of understanding and analysis.
The key points relating to the preparation of a consolidated statement of financial
position and consolidated statement of financial performance are as follows:
-
The assets and liabilities of the parent and the subsidiary are added together
on a line-by-line basis
-
The investment in the subsidiary included in the parent’s SoFP is replaced by
a goodwill asset in the consolidated SoFP
-
The equity (ordinary) share capital and share premium balances of the parent
and subsidiary are not added together; only the parent entity balances for equity share
capital and share premium are included in the consolidated SoFP. This reflects the fact
that the consolidated SoFP includes all of the assets and liabilities under the control of
the parent entity
-
The amount attributable to non-controlling interests is calculated and shown
separately on the face of the consolidated SoFP
-
The group share of the subsidiary’s post-acquisition retained earnings is
calculated and included as part of group retained earnings
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-
Parent and Subsidiary may well trade with each leading to cancel each other
out receivables and payables in P and S
-
If a dividend is paid by one entity and received by the other, the net effect of
this to the group is zero
-
Add together the revenues and expenses of the parent and the subsidiary on a
line-by-line basis and, if the subsidiary is acquired part-way through the year, time-
apportion the results of the subsidiary
-
Eliminate intra-group sales and purchases
-
Eliminate unrealized profit held in closing inventory relating to intragroup
trading
-
Calculate the profits attributable to the non-controlling interests
According to the IFRS 3 Business Combinations, which was reviewed in 2008,
for the capital consolidation can apply the acquisition method [5]. This method
requires:
a) identification of an acquirer,
b) determination of the acquisition date,
c) recognition and measurement of acquired recognizable property, overtaken
liabilities and every share without control right in acquired entity, and
d) recognition and measurement of goodwill or profit from a bargain
Example no. 2 -
The assumption is that the parent company A has gained 100% of
shares in the subsidiary company B. At that date individual balances of the mentioned
enterprises look like:
Account
A
B
Property, plant & equipment
85 000
18 000
Shares in B
60 000
Current assets
160 000
84 000
Total assets
305 000
102 000
Equity shares @ $1 each
65 000
20 000
Share premium
35 000
10 000
Retained earnings
70 000
25 000
Current liabilities
135 000
47 000
Total equity and liability
305 000
102 000
Solution –
for preparing consolidated statement of financial position the main points
here are shares, net assets of B at acquisition, adding line by line. In the following table
we can see consolidated figures:
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Account
Calculation
A&B
Property, plant & equipment
85 000+18 000
103 000
Goodwill
60 000-(20 000+10 000+25 000)
5 000
Current assets
160 000+84 000
244 000
Total assets
352 000
Equity shares @ $1 each
65 000
65 000
Share premium
35 000
35 000
Retained earnings
70 000
70 000
Current liabilities
135 000+47 000
182 000
Total equity and liability
352 000
In the next example is described a situation when the parent company has share
less than 100% in the subsidiary company’s capital. In that case appears the position
share which does not provide control, which expresses separately from the subsidiary
company’s equity capital. The share that does not provide control, i.e. the minority
share is a part of profit or loss and the subsidiary company’s net assets, which can
ascribe to shares in capital, not owned by the parent company, neither directly, or
indirectly, through the subsidiary companies.
Example no. 3 -
A acquired an 80% holding in B on 1 January 20X8. At this date B’s
retained earnings stood at $20,000. On this date, the fair value of the 20% non-
controlling shareholding in J was $12,500.
Account
A
B
Property, plant & equipment
85 000
18 000
Shares in B
60 000
Current assets
160 000
84 000
Total assets
305 000
102 000
Equity shares @ $1 each
65 000
20 000
Share premium
35 000
10 000
Retained earnings
70 000
25 000
Current liabilities
135 000
47 000
Total equity and liability
305 000
102 000
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Solution –
for preparing consolidated statement of financial position the main points
here are shares, net assets of B at acquisition and at reporting, and considering non-
controlling interest. In the following table we can see consolidated figures:
Account
Calculation
A&B
Property, plant & equipment
85 000+18 000
103 000
Goodwill
60 000+12 500-(20 000+10 000+20 000)
22 500
Current assets
160 000+84 000
244 000
Total assets
369 500
Equity shares @ $1 each
65 000
65 000
Share premium
35 000
35 000
Retained earnings
70 000+(25 000-20 000)*80%
74 000
Non-controlling interest
12 500+(25 000-20 000)*20%
13 500
Current liabilities
135 000+47 000
182 000
Total equity and liability
369 500
Every subsequent consolidation proceeds in the same manner, unless the parent
firm decides not to sell its share in one or more of the subsidiary companies. This is
the point at which the consolidation will come to an end. The sale of the parent
company’s share in the capital of the subsidiary firm is recorded in the parent
company’s segregated balance in such a way that the share becomes cash. The realized
profit or loss on a sale is the difference between the sales price and the book price.
Following the sale of a share, the parent company will remove all assets and liabilities
related to the sold subsidiary company when calculating the consolidated balance.
Fair value adjustments could include adjustments to recognized assets, such as
property. There may also be intangible assets that are not recognized in the subsidiary’s
financial statements due to being internally generated. These will be recognized within
the consolidated financial statements, as the parent is now purchasing these assets as
part of buying the subsidiary, and a reliable measure of cost is therefore available.
If there is a post-acquisition revaluation in the subsidiary’s non-current assets,
the full amount of the gain should be added to non-current assets. The parent’s share
of the gain is taken to the revaluation surplus, with the non-controlling interest share
of the gain being taken to NCI.
For example, Parent company has owned 80% of Subsidiary company for many
years. During the current year, P and S both revalue their properties for the first time.
Both properties increase by $100,000. The revaluations will be shown as follows:
Dr
0100
$200,000
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Cr
8510 ($100,000 + (80% × $100,000))
$180,000
Cr
8540 (20% × $100,000)
$20,000
Here we are using 8540 new account for non-controlling interest, as there are no
any related account in the chart of accounts according to national accounting standard
[3].
Profits made by entities within a group on transactions with other group entities
are:
-
recognized in the accounts of the individual entities concerned, but
-
in terms of the group as a whole, such profits are unrealized and must be
eliminated from the consolidated financial statements.
Unrealized profit may arise within a group on:
-
inventory where entities trade with one another
-
non-current assets where one group entity has transferred an asset to another.
The key is that we need to remove this profit by creating a Provision for
Unrealized Profit (PUP). Any profit on sale that is made by the selling entity is
unrealized and eliminated as with inventory. Unlike inventory, which is usually sold
shortly after the reporting date, goods that become non-current assets of the receiving
entity are likely to be included in the consolidated statement of financial position for a
number of years. Where there is unrealized profit on non-current assets the necessary
reduction in non-current assets will reduce as the non-current asset is depreciated.
Therefore, the PUP must be recalculated at the end of each period in which the asset
appears in the consolidated statement of financial position.
For transferring fixed asset from Parent to Subsidiary at the end of reporting
period following double entry should be performed:
Dr
8710 - for gain on disposal in parent’s report
Cr
0100 - for difference in actual carrying amount for group company
Cr
8710 - for extra depreciation in subsidiary’s report
For transferring fixed asset from Subsidiary to Parent at the end of reporting
period following double entry should be performed:
Dr
8710 - for gain on disposal in subsidiary’s report
Cr
0100 - for difference in actual carrying amount for group company
Cr
8710 - for extra depreciation in parent’s report
As for the main part of our research, when preparing the fixed assets
consolidation report, determining the fair value of fixed assets on the balance sheet of
the controlled enterprise, and when there is a mutual sale of fixed assets between the
parent and daughter company, important consolidation requirements are fulfilled.
The process of fixed assets consolidation typically involves several steps,
including:
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Identifying entities: Determine the entities or subsidiaries within the
organization that will be included in the consolidation process.
Gathering data: Collect the financial information of each entity, including details
of fixed assets, such as their acquisition cost, depreciation, impairment, and any
changes in valuation.
Adjustments and eliminations: Make necessary adjustments and eliminations to
eliminate intercompany transactions, unrealized gains or losses, and any other intra-
group balances or transactions that may distort the consolidated financial statements.
Valuation and revaluation: Determine the appropriate valuation methods for
fixed assets, ensuring consistency across entities and compliance with relevant
accounting standards or regulations.
Calculation of depreciation and impairment: Apply consistent depreciation
methods and assess impairment of fixed assets based on relevant accounting standards.
Presentation in consolidated financial statements: Aggregate the fixed assets and
related financial data from each entity into a single entity, presenting them in the
consolidated financial statements [8].
Fixed assets consolidation provides several benefits, including:
Comprehensive view: Stakeholders gain a complete and accurate understanding
of an organization’s fixed asset base and its financial implications.
Comparability: Consolidated financial statements enable stakeholders to
compare the performance, asset utilization, and financial position of the organization
across different entities or subsidiaries.
Decision-making: Consolidated fixed assets information assists stakeholders in
making informed decisions regarding investment, resource allocation, and risk
assessment.
Risk management: Consolidated reporting facilitates better risk identification
and management by providing a holistic view of an organization’s fixed asset exposure
and potential vulnerabilities.
CONCLUSION
Different consolidation procedures are used depending on the degree of control
and influence of the parent firm on the group members. The term “full consolidation”
refers to the consolidation of capital between the parent and subsidiary companies. The
acquisition approach is used in the entire consolidation. The equity technique is used
to consolidate the capital of associates, whereas the quota consolidation method is used
to consolidate the capital of joint ventures.
After IFRS 3 review thereby was made easier the situation for practitioners and
composers of the consolidated calculation. The company’s management and the
balance policy’s creators lost their room for manipulation, so on the balance policy in
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the field of full consolidation of the capital cannot be spoken about. Regulating one
technique of entire capital consolidation also improves the consolidated financial
statement’s comparability. A wide range of criteria are utilized in the framework of
such documentation, all of which must be taken into consideration in the final version
of the reporting. As a result, consolidated reporting allows you to acquire the most
comprehensive and accurate picture of the parent organization’s financial condition
and performance, as well as all organizations under its control, i.e., the objects are
treated as a single economic unit. It’s important to remember that the process of
preparing consolidated financial statements is quite complicated, necessitating
immediate preparation.
In the context of Uzbekistan, NAS and IFRS accounting policies may be
converged to reduce the impact of the transition to IFRS on the financial results and
IFRSs of companies that decide to do so [10].
This reduces the quantity of corrections
in the first IFRS report. Among the main methodological recommendations for
accounting policies to bring accounting closer to IFRS are:
- application of a single methodology for creating reserves for receivables and
loans provided in IFRS cooperating with NAS;
- creating reserves in NAS in accordance with IFRS principles;
- regular inventory stock taking, write-off of illiquid stock;
- creating a reserve for litigation based on the principles of IFRS reservation;
- application of a single methodology for the creation and restoration of reserves
for unused holidays.
The proposed double entry and new chart of accounts for the consolidation of
fixed assets serve as a methodology for compiling reports.
Taking into consideration the findings, we believe that the establishment of a
single methodology for the responsible authority’s implementation of the consolidation
process is essential. It ensures the quality and fair presentation of the consolidated
financial statements by meeting all of these requirements.
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