Last reviewed: July 2026.
Group accounts are consolidated financial statements that present a parent and its subsidiaries as one economic entity. IFRS 10 uses control as the basis for deciding which entities are consolidated.
Consolidation is not simple addition. The process includes acquisition-date measurement, elimination of the parent’s investment, goodwill, non-controlling interests and removal of intragroup transactions.
What control means
An investor controls an investee when it has:
- power over the investee;
- exposure or rights to variable returns; and
- the ability to use power to affect those returns.
Voting rights are important, but contracts, substantive potential voting rights and decision-making arrangements may also matter.
Parent and subsidiary
A parent controls one or more subsidiaries. Consolidated statements include the group from the date control is obtained until the date control is lost.
The parent may also prepare separate financial statements under IAS 27, but those are not a substitute for consolidation where consolidated statements are required.
Single economic entity principle
Consolidated statements show group assets, liabilities, equity, income, expenses and cash flows as though the group were one entity.
This means intragroup balances and transactions are eliminated because a group cannot owe money to or earn profit from itself.
Basic consolidation process
| Step | Action | Purpose |
|---|---|---|
| 1 | Align reporting dates and accounting policies | Create comparable information. |
| 2 | Add like items of parent and subsidiary | Combine group resources and obligations. |
| 3 | Eliminate parent investment against subsidiary acquisition-date equity | Replace investment with underlying net assets and goodwill. |
| 4 | Recognise goodwill or bargain purchase result | Reflect acquisition accounting under IFRS 3. |
| 5 | Recognise non-controlling interests | Present ownership not attributable to the parent. |
| 6 | Eliminate intragroup balances, sales, expenses and unrealised profit | Report only external group activity. |
Worked Group Example
Parent P owns 80% of Subsidiary S and controls it. P’s receivable from S is 30,000 and S reports the matching payable. S sold goods to P for 50,000 at a profit of 10,000, and half of those goods remain in P’s closing inventory.
Consolidation eliminates the 30,000 intragroup balance, removes the 50,000 intragroup sale and purchase, and eliminates 5,000 unrealised profit from closing inventory. Non-controlling interests receive their share of post-acquisition results after the applicable consolidation adjustments.
Acquisition-date net assets
Measure identifiable acquired assets and liabilities under IFRS 3, including relevant fair value adjustments and previously unrecognised identifiable intangible assets.
Acquisition-date net assets are central to goodwill and post-acquisition profit calculations.
Goodwill
Goodwill broadly compares consideration, non-controlling interest and any previously held interest with the fair value of identifiable net assets acquired.
Goodwill is recognised in the consolidated statement and tested for impairment rather than amortised under full IFRS.
See the IFRS 3 goodwill guide.
Non-controlling interest
Non-controlling interest represents equity in a subsidiary not attributable to the parent. It is presented within consolidated equity separately from parent owners’ equity.
NCI shares in post-acquisition profits, losses and other comprehensive income according to the applicable ownership and contractual arrangements.
Post-acquisition profits
Only profits earned after the parent obtains control contribute to consolidated retained earnings. Pre-acquisition reserves form part of acquisition-date net assets.
The goodwill and pre-acquisition profits guide provides a worked approach.
Intragroup balances
Eliminate receivables and payables between group entities. Differences may arise from cash in transit, goods in transit, exchange rates or timing errors and should be reconciled before elimination.
Intragroup sales and unrealised profit
Eliminate intragroup revenue and the corresponding purchase or cost. If goods remain within group inventory, eliminate unrealised profit so inventory is measured from the group’s perspective.
Related tax effects and NCI allocation depend on the direction of the transaction and applicable requirements.
Intragroup non-current assets
Eliminate profit on intragroup sales of property, plant and equipment and correct subsequent depreciation to the amount that would have existed without the internal transfer.
Uniform accounting policies
Use consistent accounting policies for similar transactions and events. Adjust subsidiary information where necessary before consolidation.
Reporting dates should normally align, with adjustments for significant intervening transactions when permitted differences exist.
Loss of control
When control is lost, derecognise subsidiary assets, liabilities and NCI, recognise consideration and any retained interest as required, and record the resulting gain or loss.
Do not continue full consolidation after control ceases.
Investment entity exception
Qualifying investment entities generally measure specified subsidiaries at fair value through profit or loss rather than consolidating them, subject to the detailed IFRS 10 requirements.
This is a narrow exception and should not be applied merely because a parent holds investments.
Consolidated statement of cash flows
The group cash-flow statement includes external cash flows of the parent and subsidiaries. Intragroup cash flows are eliminated, while acquisition and disposal cash flows are presented under IAS 7 after considering cash acquired or disposed of.
See the cash-flow statement linkage guide.
Foreign subsidiaries
Foreign operations require translation into the group presentation currency. Exchange differences are recognised and accumulated according to the applicable foreign-currency requirements.
Translation is separate from eliminating intragroup monetary balances and assessing whether exchange differences remain in consolidated profit or OCI.
Consolidation controls
- maintain a complete legal-entity and ownership register;
- document control judgements and changes;
- standardise reporting packages and close deadlines;
- reconcile intercompany balances before elimination;
- control consolidation journals and model access;
- review goodwill, NCI and currency movements;
- validate consolidated statements against approved entity data.
First-Year Consolidation Project Plan
A first consolidation should begin with a legal-entity register and control assessment, followed by reporting instructions, chart-of-accounts mapping and an opening acquisition analysis. The team should assign clear owners for goodwill, tax, foreign currency, intragroup matching and disclosures.
A dry run before year end helps identify missing data, inconsistent policies and system limitations. The group can then resolve intercompany differences, align reporting information and test the consolidation file before the reporting deadline instead of relying on late manual journals.
Disclosures
IFRS 12 requires information about significant judgements, interests in subsidiaries, NCI, restrictions, risks and changes in ownership. IFRS 19 may permit reduced disclosures for eligible subsidiaries from 2027, but recognition and measurement requirements remain.
Common mistakes
- consolidating based only on ownership percentage;
- including subsidiary pre-acquisition profits in group retained earnings;
- leaving the parent’s investment in consolidated assets;
- failing to eliminate intragroup balances and unrealised profit;
- using inconsistent policies;
- omitting NCI from equity;
- continuing consolidation after loss of control.
Related Group Accounting Guides
- When Group Accounts Are Required under IFRS 10
- Parent Undertaking and IFRS 10 Control
- IFRS 12 Group Disclosures Checklist
- Group Accounting Definitions: Control, NCI and Associates
Key takeaway
Group accounts present controlled entities as one economic entity. Apply the control test, acquisition accounting and complete elimination procedures before reporting consolidated results.
Official references: IFRS 10 Consolidated Financial Statements, IFRS 3 Business Combinations, and ACCA consolidated statement guide.