PROBLEMS OF ACCOUNTING AND FORMATION OF CONSOLIDATED FINANCIAL STATEMENTS OF CORPORATIONS IN THE EVENT OF LOSS OF CONTROL OVER SUBSIDIARIES AND ASSOCIATES

The article discusses the practice of reflecting in the accounting and consolidated financial statements of corporations operations related to the loss of control over subsidiaries and affiliates in the reporting period. The author set the task to show the importance and possibilities of improving the mechanism for the formation of financial statements by the parent company in cases of loss of control over other enterprises and partners. The article emphasizes that the main objective of International Financial Reporting Standards (IFRS) is to ensure its reliability, expressed in the absence of material misstatement. Therefore, the prescribed accounting procedures must be followed in accordance with the requirements of relevant international standards in operations with loss of control over subsidiaries, and as well as significant influence on business partners, whether voluntarily or otherwise. Particular attention is paid to the consideration of the prerequisites for misreporting and the ways of its elimination or minimization. The circumstances, both methodological and organizational, of the appearance of distortions in the consolidated financial statements of the parent company are disclosed. The most common errors in practice related to the organization of financial accounting of operations by the parent company associated with the loss of control over a subsidiary and joint venture, as well as the main reasons for their occurrence are identified and systematized. The results obtained in the course of the study indicate the likely serious shortcomings in the accounting of transactions upon loss of control over subsidiaries of organizations applying IFRS. Based on the results of the study, recommendations are made. In particular, the information reflected in the accounting relating to these transactions should be included in the Directors’ Report to make it not only more noticeable, but also subject to intensive review and evaluation. It is determined that external auditors should also play an active role in reviewing the consolidated financial statements in order to obtain reasonable assurance that the financial statements as a whole are free from material misstatement, whether due to fraud or error, and that reporting firms are taking steps to prevent errors and improve internal audit as the most important component of quality control at the enterprise.

control, accounting, subsidiary, consolidated reporting, loss of control, reorganization, misreporting; combined reporting, reporting standards, reporting company, associated enterprises

Komarova M. A., Yazykova S. V., Plekhanova E. O. Problems of accounting and formation of consolidated financial statements of corporations in the event of loss of control over subsidiaries and associates. Business. Education. Law, 2022, no. 4, pp. 146—152. DOI: 10.25683/VOLBI.2022.61.472.