IFRS 10: Consolidated Financial Statements – Brazil

May 26, 2021

The adoption of the Normas Internacionales de Información Financiera or International Financial Reporting Standards (NIIF/IFRS) began in Brazil in 2005 through the first pronouncements of the CFC or Conselho Federal de Contabilidade (Federal Accounting Council), the body in charge of regulating accounting in Brazil for entities not traded in public markets.

Thus, financial entities regulated by the Central Bank of Brazil (BACEN) were also regulated and required to file consolidated financial statements under the IFRS as of 2010.


Consolidated financial statements is the grouping of the financial statements of the controlling entity (parent company) with the separate financial statements of the subsidiaries, to be filed as if they were a single economic entity.

Main terms for evaluating the preparation of consolidated financial statements


According to IFRS 10 “Consolidated Financial Statements”, an entity controls when it has power over other entities, has rights to variable returns and can influence returns through its power over them.

Power of Attorney

An entity (parent) has power over one or more entities when it has rights that give it the current ability to direct the relevant activities, i.e., the activities that significantly affect the performance of one or more entities (subsidiaries).


An entity that is controlled by another entity.

When should an entity consolidate its financial statements with the entities it controls?

If an entity prepares its financial statements in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) controlling and having power over one or more entities, its consolidation to the financial statements in compliance with IFRS No. 10 “Consolidated Financial Statements” will be required.

Is there a possibility that a parent company does not consolidate its financial statements with one or more other entities?

Under IFRS 10, a controlling entity need not consolidate consolidated financial statements if it meets all of the following conditions:

  • The parent company has informed, without objection, the subsidiaries, and other owners (non-voting) that they will not present consolidated financial statements.
  • Its debt or equity instruments are not traded in a public market, whether on a local or foreign stock exchange.
  • It does not file its financial statements, nor is it in the process of doing so with a regulatory organization.
  • Its ultimate parent company prepares consolidated financial statements.

Considerations in the preparation of consolidated financial statements

  • The consolidated financial statements must have the same accounting framework.
  • The parent company shall present non-controlling interests in the consolidated statement of financial position, within equity, separately from the equity of the owners of the parent company.
  • Similar portions of assets, liabilities, equity, income, and expenses are combined.
  • The amount of the parent’s investment in each subsidiary and the parent’s interest percentage in the equity of each subsidiary are offset (eliminated).
  • Assets, liabilities, equity, income and expenses and intragroup cash flows related to transactions between group entities are eliminated in their entirety.

What is the advantage of preparing and filing consolidated financial statements?

When a controlling (parent) entity complies with all IFRS and consolidates its financial statements with one or more entities, it maintaining control and power, it will allow in a single set of financial statements, informing owners and other users of the Group’s economic situation and performance. 

Thus, having consolidated financial statements will help the Group to be able to participate in bidding processes with private and state entities. It will also help the Group to obtain new financing from banks.

we assist, at Vargas Alencastre, García y Asociados (Vargas, Garcia, and Associates), entities in their preparation and consolidated financial statements filing in compliance with consolidation procedures, according to IFRS.