Suppose Entity A acquires Entity B in a business combination and all the considerations have been completed by 31 December 2007 except that government approval which was still pending as at year end. Should entity A consolidate Entity B as at 31 December 2007?



I believe the answer lies in the issue of control. If the acquirer still does not have control, i.e. voting rights, directorship, active management, no consolidation should be done until Control is obtained. In the meantime, the Acquirer can book in the investments in subs as a prepayment. Hope this helps.





Let us look into the three types of financial reporting:
1) Management Set of Accounts (MSA)
2) Statutory Accounting
3) Tax Accounting

Considering your scenario, legally the account cannot be merged in statutory and tax books since it was not approved by the law / Govt., hence it can be consolidated in MSA and presented for the management review.

On the other hand, M&A cost as of that date can be represented in Statutory and Tax books of Entity A with the additional notes about Entity B.



I agree with Leslie. I had a client last year where control was obtained on acquisition but certain percentage of shares were in an escrow account as the takeover company was listed and an open offer was made under the local securities exchange guidelines. For group consolidation, control had been established as required under IAS 27 and for local reporting, adequate notes were given to indicate that 51% control of voting rights existed.
Just make sure that the facts are disclosed adequately and the anticipated timelines for regulatory compliance.

If the approval was obtained before the preparation of the financial statements, it would have to be consolidated. If not and the government approval is that important AND there is no way of knowing whether it will be yes or no the company should not consolidate, but provide pro-forma consolidated statements in the notes (similar to showing the effect of all year consolidation of new acquisitions in the year),

Kind regards,


In my humble option you should consolidate if you obtain full control over subsidiary (ie. goverment approval) before you made up the financial statment.


So if you go public with you financial statement on  April 2008 and the goverment approval was given in March 2008 you should consolidate.




Yes unless prohobitaion in local laws.
Thank Your & Best Regards

Dear Nyasha,
As per my knowledge of IFRAS and IAS conslolidation has been accured on 31-Dec-07 therefore consolidated financial statements should be prepared on the basis of date of acqueisition. if local laws do NOT restrect