How does the adoption of IFRS impact the consolidation procedure for multinational corporations?

The adoption of International Financial Reporting Standards (IFRS) impacts the consolidation procedure for multinational corporations by providing a consistent accounting framework to be applied by all entities under the group. This facilitates the comparison and combination of financial statements from different countries by requiring standardized recognition, measurement, and disclosure of financial transactions. Under IFRS, entities must consolidate their financial statements when control is present, which often requires a complex assessment of the relationship between parent and subsidiary, including potential voting rights and contractual arrangements.

For example, the consolidation process under IFRS requires entities to eliminate intra-group transactions and any unrealized profits or losses arising from these transactions in the consolidated financial statements. Additionally, IFRS 10 'Consolidated Financial Statements' outlines a single consolidation model that identifies control based on power, returns, and the ability to use power to affect those returns, which can be different when compared with other accounting standards like US GAAP.

Reference: IFRS 10—Consolidated Financial Statements