In Argentina, the accounting framework evaluates different normative possibilities when analyzing and displaying the different items of the financial statements. The available standards that may be applied are:
- International Financial Reporting Standards (IFRS).
- International Financial Reporting Standards for SMEs (IFRS for SMEs).
- Professional accounting standards issued by the FACPCE (Federación Argentina de Consejos Profesionales en Ciencias Económicas – Argentine Federation of Professional Councils in Economic Sciences) (Technical Resolutions – TR -).
There are economic activities in which certain taxpayers apply IFRS and others do not, given the mandatory nature thereof for some taxpayers and the freedom of choice for others. Likewise, there will be taxpayers with the same economic and financial situation reporting financial statements with assets, liabilities, and different results, depending on the implementation or not of these IFRS.
Consolidated Financial Statements
The TR 26 of the FACPCE indicates that entities filing consolidated financial statements along with their individual financial statements and those that only file their individual financial statements due to not exercising control or joint control over other entities must apply IFRS (mandatorily or optionally) completely and without modifications, except for one: In the individual financial statements, investments in subsidiaries (controlled entities), jointly controlled entities, or associates in which significant influence is held should be accounted for by the equity method according to IAS 28 and with the same adjustments incorporated in the consolidated financial statements. This criterion differs from that established by IAS 27 for the aforementioned case since it provides to measure them: at cost or fair value if it can be reliably measured. This exception aims to ensure that the equity, results, and eventually the other comprehensive results, attributable to the controlling entity’s shareholders and arising from the consolidated financial statements, coincide with those reported in the individual financial statements and are under the current legal regulations in Argentina, depending on which corporate decisions are based on the individual statements and not on the consolidated ones.
In this regard, Argentina applies IFRS 10 completely and without modification.
IFRS 10 Implementation
The International Financial Reporting Standard No. 10 (IFRS 10) Consolidated Financial Statements aims to establish the principles to report and prepare the consolidated financial statements when an entity controls one or more separate entities.
To meet this objective :
- An entity controlling one or more distinct entities (subsidiaries) has to file consolidated financial statements.
- It defines the principle of control and establishes it as the base of consolidation.
- It establishes how the principle of control is applied to identify whether an investor controls an investee and therefore must consolidate such an entity.
- It establishes the accounting requirements to prepare consolidated financial statements.
- It defines an investment entity and establishes an exception to consolidating certain subsidiaries of an investment entity.
The principle of consolidation is the control of an investee, which is why we refer to the definition established in this Standard:
Control of an investee
An investor controls an investee when exposed or has rights to variable returns from its involvement with the investee and can influence those returns through its power over the investee.
If an entity owns a significant percentage of the shares of a subsidiary, it is considered that controls and maintains the power to influence the decision-making on its operating and financial activities. Therefore, it is required to consolidate under IFRS 10.