Chapter 20


Sec. 1. Scope. This Chapter provides the standards, policies, guidelines and procedures in the Consolidation of Financial Statements. It is an accounting process that allows an entity to combine its financial data with information from its controlled entities and present financial reports as a single entity which is the whole NG.

Sec. 2. Definition of Terms. For the purpose of this Manual, the following terms shall be construed to mean as:

a. Consolidated Financial Statements - are the financial statements of an economic entity (controlling entity and controlled entities combined) presented as those of a single entity.

b. Controlled Entity - is an entity, including an unincorporated entity such as a partnership, which is under the control of another entity (known as the controlling entity).

c. Controlling Entity - is an entity that has one or more controlled entities.

d. Cost Method - is a method of accounting for an investment, whereby the investment is recognized at cost. The investor recognizes revenue from the investment only to the extent that the investor is entitled to receive distributions from accumulated surpluses of the investee arising after the date of acquisition. Entitlements due or received in excess of such surpluses are regarded as a recovery of investment, and are recognized as a reduction of the cost of the investment.

e. Minority Interest - is that portion of the surplus or deficit and net assets/equity of a controlled entity attributable to net assets/equity interests that are not owned, directly or indirectly, through controlled entities, by the controlling entity.

f. Separate Financial Statements - are those presented by a controlling entity, an investor in an associate, or a venture in a jointly controlled entity, in which the investments are accounted for on the basis of the direct net assets/equity interest rather than on the basis of the reported results and net assets of the investees. (Par. 7, PPSAS 6)

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