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11 Oct. 2019

Research Report 13 Parent, Subsidiary and Group Financial Reporting

Do current financial reporting requirements for parent/subsidiary structures meet user needs in a cost-effective way? Research Report 13 addresses this question, which is an important aspect of the Australian financial reporting framework.

For users most dependent on general purpose financial statements (GPFS) in the for-profit sector, they are generally satisfied with summary financial information about parent entities which is currently required in the consolidated financial statements.

Some users need more information disclosed about subsidiaries in consolidated financial statements than is currently required, particularly if complete sets of subsidiary financial statements were to be no longer available to them.

Whilst the research findings relate to private sector for-profit entities, the benefits for users of consolidation and other information pertinent to parent/subsidiary structures are considered to be equally relevant in relation to private sector not-for-profit entities and public sector entities. Further research is required to consider whether there is a need to align financial reporting requirements (both standards and regulations) arising from parent/subsidiary structures in those sectors with the for-profit private sector and whether the differences can be justified on sector-specific grounds.

The Report also identifies some related areas for further consideration and future research.