Question:

Part A: Consolidated Financial Reporting and Business Combinations

ABC Company, a multinational corporation, has recently acquired XYZ Company, a smaller entity operating in the same industry. As the newly appointed financial analyst of ABC Company, you have been tasked with preparing the consolidated financial statements after the acquisition. ABC Company acquired 80% of the outstanding shares of XYZ Company, thereby gaining control over its operations.

(i) Discuss the accounting methods and principles that ABC Company should apply to consolidate the financial statements of XYZ Company into its own financial statements. In your explanation, address the following subpart:

(a) Explain the concept of control in the context of business combinations, highlighting the criteria that determine control according to the International Financial Reporting Standards (IFRS). Discuss the implications of control on the consolidation process, including the recognition and measurement of assets, liabilities, revenues, and expenses in the consolidated financial statements. Provide illustrative examples to support your explanation.

In your response, consider the specific IFRS standards relevant to business combinations and consolidation, and evaluate the impact of the acquisition on ABC Companys financial position, financial performance, and cash flows. Additionally, analyze the ethical considerations that ABC Company should take into account while preparing the consolidated financial statements, ensuring transparency and accountability to stakeholders.