All the Important Information from the Cyprus Auditors at Yiallourides & Partners.

Many Cyprus auditors will claim to help you with the preparation of consolidated financial statements, but not many Cyprus audit firms will do it right. We at Yiallourides & Partners have been handling these and other types of financial responsibilities for a long while now.

In this blog post, our Cyprus auditors will walk you through the intricacies of consolidated financial statements, and explain key terms and regulations.

Definition of consolidated financial statements: The obligation to prepare Consolidated Financial Statements arises when a parent company buys shares in another company (subsidiary), through which it gains control.

Control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, and it is presumed that control is granted when the parent owns more than 50% of the entity’s voting rights.

Consolidated Share Capital and Reserves:

The Consolidated Statement of Financial position includes the Parent’s Equity and Reserves plus the parent’s share of subsidiary’s post-acquisition reserves. The subsidiaries’ reserves at acquisition along with its share capital are cancelled against the parent’s cost of investment in subsidiaries. The same calculation is used for each reserve separately.

Acquisition of a subsidiary mid-year:

Irrespective of the date when the subsidiary was acquired, the Consolidated Statement of Financial Position (CSFP) needs to show the picture of the Company as of that date (i.e. 31 December) and the figures are not apportioned on the period which the subsidiary belonged to the parent.

However, the Consolidated Statement of Profit and Loss (CSPL) should show only the consolidated results from the date of acquisition onwards until the year end. Feel like you need to know more? All esteemed Cyprus audit firms like ours will know how to assist.


Normal Goodwill:

  • Arises when the parent pays a consideration to buy the subsidiary of a value more of the subsidiaries’ net assets.
  • The value of goodwill is only calculated and used on the consolidated FS.
  • Goodwill is not amortised but it is subject to annual impairment review (IAS 36).

Bargain Goodwill:

  • Arises when the parent pays a consideration to buy the subsidiary of a value less of the subsidiaries’ net assets.
  • In such cases, the FV of the subsidiaries’ net assets need to be assessed to ensure they are correct.

Approach to calculate Goodwill:

Consideration transferredX
Plus: Non-Controlling Interest at acquisition (net assets * NCI%)X
Less: Net Assets as acquisition(X)

Non-Controlling Interest (NCI):

NCI is something that most experienced Cyprus audit firms will know how to handle. In short, it is the percentage of ownership which is not attributable to the group. The Fair Value method is used as per IFRS 3 to calculate NCI and this usually results in a higher amount of NCI (compared to the old method used).

Approach to calculate NCI

FV of NCI at acquisitionX
Share of post acquisition profits and other reserves (NCI%*post acquisition)X
NCI at year end     X

Preparation of consolidated FS

  1. Identify % of ownership
  2. Obtain net assets of the subsidiary at the year end and at acquisition (to determine post-acquisition NA)
  3. Calculate goodwill
  4. Calculate NCI
  5. Calculate Retained Earnings at the year end

*Note that our Cyprus auditors at Yiallourides & Partners can take care of these tasks for you, and we have plenty of experience with it.

Elimination of intra-group balances:

The purpose of the consolidated results is that the results of the Group as a whole are shown as one Company. Therefore, any balances between the Group Companies need to be eliminated. Such balances include:

  • loans, debentures or preference shares
  • cost of investments
  • intra-group trading
  • Dividends (however, dividend paid to NCI are not eliminated and are shown in Equity)

Reminder: If you are not sure what this means, please consult any of the available Cyprus audit firms.

Treatment of other group transactions

  1. Unrealized intra-group profit

The group should only show the profits generated from third parties. When intra-group transactions give rise to profits, these are unrealized as far as the group as a whole is concerned. Unrealized profits are eliminated.

2. Inventories

    Where goods transferred at a profit are still held at the year-end by group companies, the unrealized profit must be eliminated on a consolidation (provision of unrealized profit PURP). This adjustment is always made in the books of the seller on the consolidated FS (not stand alone of seller).

    3. Transfer of Non-Current Assets

      The CSFP must show the assets at their cost and the depreciation should be made on that cost. The group accounts should reflect the NCA as if the transfer was never made.

      Carrying amount of NCA at year endX
      Less: CA of NCA at year end if transfer had not been made(X)
      Unrealized profitX

      While this may seem confusing at first, your Cyprus auditors will know how to simplify it for you.

      Other factors to consider:

      – All foreign currencies of the subsidiaries are translated to the currency of the Parent’s company as per the requirements of IAS 21 Foreign Exchange Currency.

      – The NCI is shown under Equity in the consolidated FS. If there is an acquisition of a non-fully owned subsidiary during the year, this should be reflected as ‘NCI added on the acquisition of a subsidiary” and in case of a disposal it is shown as “NCI eliminated on disposal”.

      – The investments in Associates and Joint Ventures do not fall under the scope of preparation of consolidated FS. The CSFP are prepared on a normal line by line basis for the parent and subsidiary. The associate should apply equity accounting (share of profit/loss of associate).

      – The disposal of a whole subsidiary falls under the scope of IFRS 5 Non-Current Assets held for Sale and Discontinued Operations and should be presented as such. Therefore, no assets are shown in the SFP and on the SPL this is shown under a single line as a ‘Profit/Loss’ from discontinued operations.

      In sum, we have shown you what Consolidated Financial Statements are all about, and how you (or all Cyprus audit firms) can handle them. It is imperative, though, to choose the right Cyprus auditors to work with for this process, and we at Yiallourides & Partners have a skilled team of professionals who can help you. Want to know more? Feel free to reach out to us.

      For more details, please contact:

      Managing Director

      George Yiallourides