accounting 1. Consolidation

Question 1

Which are the accounting principles

Answer 1

1. Prudence
   - Core principle of the Swiss Code of obligations (OR)
   - Prevents excessive valuation of assets and liabilities.
   - Protect company shareholders and creditors.
2. True and fair view
   - Followed by Swiss GAAP FER, IFRS & US-GAAP
   - Used in consolidated financial statements.

Question 2

Basis of the accounting standards

Answer 2

• Principle-based (OR and Swiss GAAP FER):
  Regulations are formulated generally and service guidelines
  ➔ more flexibility and more judgment involved
  ➔ Not every accounting issue is regulated, but rather more general ones.
• Rule-based (US-GAAP and IFRS)
  →every single accounting issue is individually regulated.
  →minimum amount of discretion in interpretation
  → Users of the standard should know exactly what to do in every situation.

Question 3

Structuring of Standards

Answer 3

General requirements (general principles in specific situations -> OR) and Topical Focus (concrete details and facts in specific situations -> US-GAAP, IFRS, Swiss GAAP FER)

Question 4

Consolidated financial statements

Answer 4

At the group level, the individual financial statements are consolidated. So that the individual financial statements can be summarized.
To do this,the statements must be brought into a comparable form. In order to set upconsolidated financial statementsunder IFRS, each company has to adjust their individual financial statements under local GAAP to result in financial figures under IFRS.
prepared according to the true and fair view principle in order to reflect the actual business situation of the whole group.

Question 5

Basis of consolidation

Answer 5

more than 50% = full consolidation
20-50% = equity method
less than 20% = fin. investment

Question 6

Steps for full consolidation

Answer 6

1. investments (H.R, equity and Goodwill)
2. equity de los otros
3. hidden reserves de los otros
   for the exam
4. Assets: sumas todos mas todas las hidden reserves
5. Calculas goodwill con la eq: Investment=eq+ HR+GW
   (liability side
   EQ= always EQ from Parent company
   minority interest: lo qua owns los otros (su equity y hidden reserves)
   liabilities: sum of both liabilities