LEMBAGA PIAWAIAN PERAKAUNAN MALAYSIA
MALAYSIAN ACCOUNTING STANDARDS BOARD

Consolidated Financial Statements and

Investments in Subsidiaries

The standards, which have been set in the bold type should be read in the context of the background material and implementation guidance in this Standard, and in the context of the Foreword to Financial Reporting Standards. Financial Reporting Standards are not intended to apply to immaterial items.

Objective

The objective of this Financial Reporting Standard is to prescribe the basis for the preparation and presentation of consolidated financial statements for a group of enterprises under the control of the reporting parent. It also prescribes the accounting treatment for investments in subsidiaries in the separate financial statements of the reporting parent. In prescribing the basis of consolidated financial statements, this Standard deals with the grounds as to when a subsidiary should be excluded from consolidation and its prescribed treatment, the consolidation procedures, disposals of subsidiaries, and changes in stake and composition of a group.

Scope

1. This Standard should be applied in the preparation and presentation of consolidated financial statements for a group of enterprises under the control of a parent.

2. This Standard should also be applied in accounting for investments in subsidiaries in a parent's separate financial statements.

3. This Standard supersedes MASB Approved Accounting Standard IAS 27, Consolidated Financial Statements and Accounting for Investments in Subsidiaries, issued previously by the Malaysian professional accountancy bodies.

4. Consolidated financial statements are encompassed by the term "financial statements" included in the Foreword to Financial Reporting Standards. Therefore, consolidated financial statements are prepared in accordance with Financial Reporting Standards.

5. This Standard does not deal with:

   1. methods of accounting for business combinations and their effects on consolidation, including goodwill arising on a business combination (see FRS 122₂₀₀₄, Business Combinations);

   2. accounting for investments in associates (see FRS 128₂₀₀₄, Investments in Associates); and

   3. accounting for investments in joint ventures (see FRS 131₂₀₀₄, Financial Reporting of Interests in Joint Ventures ).

Definitions

1. The following terms are used in this Standard with the meanings specified:

   Consolidated financial statements are the financial statements of a group presented as those of a single enterprise.

   Control (for the purpose of this Standard) is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.

   Group is a parent and all its subsidiaries.

   Minority interest is that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned, directly or indirectly through subsidiaries, by the parent.

   Parent is an enterprise that has one or more subsidiaries.

   Subsidiary is an enterprise that is controlled by another enterprise (known as the parent).

Presentation of Consolidated Financial Statements

1. A parent, other than a parent mentioned in paragraph 8, should present consolidated financial statements.

2. A parent that is a wholly owned subsidiary of another parent incorporated in Malaysia need not present consolidated financial statements. Such a parent should disclose the reasons why consolidated financial statements have not been presented together with the bases on which subsidiaries are accounted for in its separate financial statements. The name and registered office of its parent that publishes consolidated financial statements should also be disclosed.

3. Users of the financial statements of a parent are usually concerned with, and need to be informed about, the financial position, results of operations and changes in financial position of the group as a whole. This need is served by consolidated financial statements, which present financial information about the group as that of a single enterprise without regard for the legal boundaries of the separate legal entities.

4. A parent company that is itself a wholly owned subsidiary of another parent company incorporated in Malaysia need not present consolidated financial statements since such statements may not be required by its parent company and the needs of other users may be best served by the consolidated financial statements of its parent. Sub-paragraph 5(4)(a) of the Ninth Schedule of the Companies Act 1965 (the Act) exempts only a wholly owned parent company from the requirement to present consolidated financial statements, provided the other parent enterprise is a company incorporated under the Act. A wholly owned subsidiary of a foreign enterprise is not exempted from the requirement to present consolidated financial statements.

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