Some aspects regarding the consolidation of foreign entities




Keywords:parent-company; consolidated financial annual statements; conversion; foreign entities

In accordance with the Accounting Low no. 82/1991, republished, the parents companies, defined in the accounting regulations applicable to the groups, draw up and present both annual and consolidated financial statements, too. \r\n\r\nThe conditions for drawing up such consolidated financial statements have been established in the Order of public finance minister no. 1752/2005 for approval the accounting regulations conform to the European directives. \r\n\r\nFrom the point of view of the legal requirements, starting with the financial year of 2007, the International Financial Reporting Standards (IFRS) must be applied by the companies whose securities are admitted to trading on a regulated market, at their balance sheet date, for drawing up consolidated financial statements purposes.\r\n\r\nIn order to make possible the comparability with the information from the consolidated financial statements of the year 2007, the first consolidated financial statements, official, on the base of the International Financial Reporting Standards (IFRS), may be those prepared for the 2006 financial year.\r\n\r\nUnlike the domestic entities, the consolidation of foreign entities presents some particularities, because of the exchange difference related to the translating of the results and financial position of those entities. Their accounting treatment is included in the IAS 21 “The effects of changes in foreign exchange rates”. \r\n\r\nIn order to include the financial statements of the foreign entities within the financial statements of the reporting entity by applying different methods of consolidation, it is necessary to make the operation consisting in the conversion of the information from these above-mentioned statements.