Consolidation – estimations
This is another concept which I have learned and has enabled me greatly to understand the financial statements in the case of Woolworths. It is refereed to as the company and the consolidated statements are those of the whole entity. That is, Woolworths limited and its controlled entities such as subsidiaries and associates. Subsidiaries are the entities in which Woolworths has the power directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Associates are those entities over which the consolidated entity exercises significant influence, but not control.
The treatment of subsidiaries is quite different from that of associates. Estimations – these are the provisions in the income statements, balance sheet and statement of shareholder equity. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into consideration the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Reference: WOW, Woolworths Ltd (2006). Financial statements.
- Website:www. woolworths. com. au Appendix WOW, Woolworths Ltd – 2006 – Financial Statements Financial Statements Five