The Principle of Consolidation in the Australian Accounting Standard AASB10

In the modern world, the success of various business ventures depends heavily upon the market share of the companies in different industrial sectors. Over the years, the establishment of subsidiary companies has become very popular especially as a means of tapping markets. As a result, such structure has led to the development of various dynamics in the complementary aspects of business operations (Lee, 2014). Such dynamics is present in financial record preparation, for example, the aspect of consolidation accounting. The principle of consolidation refers to the practice of combining the results of financial records of various subsidiaries with those the parent company. It is a process that follows a number of elaborate steps. The steps are standard according to the accounting standard accepted internationally. However, various countries have some additional provisions added to only feature in their jurisdiction. In case, Australia functions as a point of view.

The leading companies in the Australian Stock Exchange include Adelaide Brighton Limited, AGL Energy Limited, and Asciano Limited. The above three companies operate in various different industrial sectors. Adelaide Brighton Limited is in the manufacturing industry and deals with the manufacture of cement, dry blended products, as well as lime (Progressive Media Group, 2014). AGL Energy Limited is in the energy sector where it generates and supplies electricity for both commercial and retail consumers as well as other energy services and products (Global Data Ltd, 2013). Asciano Limited, on the other hand, operates in the transport industry, specializing in shipping and railway freight.

All the above companies must comply with the international standards with respect to financial statements preparation. Additionally, they must operate according to the provisions of the Australian Accounting Standard AASB10, which details on how to make consolidated accounts (Australian Accounting Standards Board, 2015). Asciano Limited owns Pacific National and Patrick Corporation as part of its subsidiary investment (ProQuest, 2012). AGL Energy Limited, with its headquarters in Sydney, operates with the help of various branches in Australia as well as in New Zealand. Adelaide Brighton Limited, on the other hand, owns the HY-TECH Group, making the conglomerate of companies in that group its subsidiaries.

With respect to the provisions of consolidated accounting as stipulated under the AASB10, the above three companies carry out their financial record preparation in accordance with its requirements (Gould et al., 2012). The provisions of the AASB10 require the consolidated financial statements to present the operations and financial position of a parent company alongside that of its subsidiary in a manner depicting that the individual entities are one. According to the reports of the above three firms, they all comply to the AASB10’s scope in that they provide the financial report for each parent company as well as that of the entire group. All the above three companies fully own their subsidiaries and thus have no obligation to fail the AASB10. The AASB10’s provisions require the preparation of consolidated financial records by the parent companies that wholly own their subsidiaries since the wholly owned subsidiaries do not have any obligation to make such financial records.

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