Consolidation theories and their implications for the financial reporting

Author:Univ. Prof. PhD. Marian SĂCĂRIN

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Keywords:Proprietary theory, parent company theory, parent company extension theory, entity theory, IFRS (International Financial Reporting Standards), consolidated financial statements

Abstract:
Starting with the financial year 2006, consolidated accounts have become a practical reality in the accounting environment from our country. Thus, through order 1752/2005 for approving the accounting regulations in accordance with European directives, the group companies, which fulfill certain criteria of size, must prepare their consolidated financial statements either based on accounting regulations in accordance with the 7th European directive, or based on international financial reporting standards (IFRS) published by the International Accounting Standards Board (IASB). \r\nSimilarly, companies whose shares are traded on a regulated market and which are preparing consolidated financial statements have the obligation, starting with the financial year 2007, to apply international financial reporting standards.\r\nWe believe that, for a better understanding of the basic principles and rules of consolidation, the acknowledgement of its various theories is of great interest. Through this study we want to highlight the consequences of consolidation theories to the financial information presented in the financial statements, as well as the way that they are reflected in the national and international accounting regulations.

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