Home  Journals  International Accounting  46(388) - 2015 December

The method of fully integrated accounts as part of consolidated accounting and financial reporting

Received: 29 January 2016

Accepted: 3 February 2016

Available online: 25 March 2016

Subject Heading: FINANCIAL ACCOUNTING

JEL Classification: 

Pages: 2-19

Importance The research is limited with the description of consolidated financial reporting, and the method of fully integrated accounts used to prepare such financial statements.
     Objectives The research unveils objectives of accounting and mainly pursues describing and disclosing the substance of the method of fully integrated accounts, or acquisition method of accounting.
     Methods Having analyzed the concept of consolidated financial statements, we conclude that the scope of this research should determine the contents of consolidated financial reporting and regard a consolidated group as an economic combination of legally independent entities, which are recognized as a single business mechanism. This approach produces the definition of consolidated financial reporting as a set of indicators reflecting the financial position of entities, which are captured within the same consolidated perimeter as a single entity, but with separate recognition of titles of the parent company's shareholders and non-controlling interests.
     Results We considered control as the basis to evaluate whether investees should be included into the consolidation perimeter as the parent company’s right to steer financial and operating policies and derive profit from subsidiaries’ operations. The right for control is regarded as a material one, which empowers its holder to manage meaningful activities.
     Conclusions and Relevance We prove it is significant to use the method of fully integrated accounts in consolidated financial reporting and accounting. The method of fully integrated accounts conveys exclusive, complete and definite control over the investee; allows for managing financial and operating activities of a consolidated group of companies when their indicators are integrated for consolidation purposes.

Keywords: consolidated group, financial statements, control, investee, method of integrated accounts

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