The Revised Control Concept in the Consolidated Financial Statements of Czech Companies

Gluzová, Tereza

doi:10.1007/978-3-319-49559-0_40

The Revised Control Concept in the Consolidated Financial Statements of Czech Companies

Tereza Gluzová²

Conference paper
First Online: 28 December 2016

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Part of the book series: Springer Proceedings in Business and Economics ((SPBE))

Abstract

Consolidated financial statements present information for a group of companies formed by a parent company and subsidiary companies, which are controlled by the parent. The existence of control is the most important factor to determine whether a company is included in the scope of consolidation. The paper focuses on the revision of the control concept introduced by IFRS 10 Consolidated Financial Statements and its impact on the companies quoted on Prague Stock Exchange (PSE). It investigates the materiality of changes in the scope of consolidation which were recorded in response to the IFRS 10 adoption. Secondary focus of the paper is on the adjustments of the related accounting policies. The findings suggest that IFRS 10 had only a very limited impact on the consolidated financial statements of the analysed companies. Paper’s findings also reveal the definitions of control in the accounting policies are inconsistently applied by the companies.

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Notes

1.
In the Czech Republic, the adoption of IFRS is voluntary also for non-listed companies preparing consolidated financial statements and subsidiary companies subject to consolidation. In such situation, both consolidated and individual financial statements may be prepared in compliance with IFRS instead of Czech accounting standards (Žárová 2013).
2.
Alternative methods include equity method, accounting for financial instrument at fair value through profit or loss or through other comprehensive income.
3.
SIC-12 defined SPE as an entity created to accomplish a narrow and well-defined objective, often created with legal arrangements that impose strict limits on the decision-making powers of the governing body over the operations of the SPE.
4.
A year later than the official IASB application date, because all standards need to pass an endorsement process to become a part of the European legislation.
5.
Structured entity is equivalent to SPE; the latter of these terms is no longer applied in IFRS. Structured entity is defined as designed so that voting or similar rights are not the dominant factor in deciding who controls the entity.
6.
A parent does not retrospectively consolidate a former investee, which would be controlled under IFRS 10, when the control was lost before the date of initial application of IFRS 10. Next relief is in the situation when the retrospective application is impracticable.
7.
The case of company CME, that is primarily listed on NASDAQ in the USA and dual-listed on PSE. Therefore, the company is allowed to present financial statements under US Generally Accepted Accounting Principles.

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Acknowledgments

This is paper has been prepared under financial support of a research project Relevance of Accounting Information on a Consolidated Basis in Business and Public Sector registered by the Internal Grant Agency of University of Economics in Prague under the registration number F1/47/2015.

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Authors and Affiliations

Department of Financial Accounting and Auditing, University of Economics, Prague, Nam. W. Churchilla 4, 130 67, Prague, Czech Republic
Tereza Gluzová

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Tereza Gluzová
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Correspondence to Tereza Gluzová .

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Faculty of Finance and Accounting, University of Economics, Prague, Czech Republic
David Procházka

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Gluzová, T. (2017). The Revised Control Concept in the Consolidated Financial Statements of Czech Companies. In: Procházka, D. (eds) New Trends in Finance and Accounting . Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-49559-0_40

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DOI: https://doi.org/10.1007/978-3-319-49559-0_40
Published: 28 December 2016
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-49558-3
Online ISBN: 978-3-319-49559-0
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