Key takeaways
- A development group needs to look at company-level, project-level and group-wide statements, because each view answers a different question.
- Entities using TFRS for NPAEs are not required to prepare consolidated financial statements under the 2022 revised version, but banks, investors or listing plans may require them.
- Consolidated financial statements eliminate all intragroup transactions, including unrealised profit embedded in project costs.
Three reporting levels
| Level | Question answered | Example data |
|---|---|---|
| Project | How is this project performing on sales, construction and cash? | Presale, CTC, Peak Funding, Project DSCR |
| Legal Entity | Is this company compliant with the law and tax requirements? | Financial statements, tax, borrower-level covenants |
| Group | How much cash, debt and real profit does the whole group have? | Consolidated financial statements, net debt, total liquidity, guarantee obligations |
When to prepare consolidated financial statements
| Entity | Approach |
|---|---|
| Entities with public accountability | Use full TFRS and assess control under TFRS 10 |
| Entities using TFRS for NPAEs | The 2022 revised version, applicable to periods beginning on 1 January 2023, permits the presentation of consolidated financial statements but does not require it, according to RSM's summary. |
| Groups preparing to raise funds or required to do so by a bank | Should prepare consolidated or pro forma consolidated statements, and discuss with the auditor before starting. |
Accounting consolidation does not change the tax burden, because each company still files its tax returns separately.
Steps to prepare a group pack
- Day 1–2 Cut off transactions and record accruals
- Day 3–4 Reconcile accounts and match intercompany items
- Day 5 Preliminary company-level statements
- Day 6 Eliminate items, analyse variances and write explanations
- Day 7 CFO reviews and signs off
- Day 8–10 Distribute and hold the review meeting
If the group is not yet ready to close within 7 days, start by getting the matching of intercompany items closed first, as this is the most common bottleneck in group accounts.
Items to eliminate
| Item | What to eliminate |
|---|---|
| Intercompany loans | Loan receivables and payables, together with interest income and expense |
| Intercompany service fees | Revenue and costs or expenses |
| Intercompany profit in remaining assets | Unrealised profit in project costs |
| Investments in subsidiaries | Eliminated against the subsidiary's equity |
| Intragroup dividends | Dividend income against dividends paid |
| Non-controlling interests | Shown separately when an SPV has other shareholders |
Example: a project management fee that embeds profit
Service Co charges an SPV THB 20 million on a cost of THB 14 million, a profit of THB 6 million. The SPV records it as project cost and has transferred 50% of the units (illustrative example).
| THB million | Two companies combined | Eliminations | Consolidated |
|---|---|---|---|
| Service fee revenue | 20 | (20) | 0 |
| Service Co's costs | (14) | 14 | 0 |
| COGS in the SPV | (10) | 3 | (7) |
| Effect on profit | (4) | (3) | (7) |
| Inventory (portion not yet transferred) | 10 | (3) | 7 |
The group's actual cost is THB 14 million. Half has been transferred, so COGS is 7 and inventory is 7. The unrealised profit of THB 3 million is eliminated, and deferred tax of THB 0.6 million may arise at the 20% rate, depending on the standards and policies applied.
Group dashboard
| Category | KPI | Frequency |
|---|---|---|
| Performance | Revenue, gross margin, EBITDA | Monthly |
| Cash | Cash, operating cash flow, Peak Funding, liquidity coverage | Weekly |
| Sale | Presale %, Velocity, Cancellation | Weekly |
| Construction | % Completion, SPI, CPI | Monthly |
| Financing and Covenants | DSCR, LTV, LTC, Net D/E, Headroom | Monthly |
| Returns | Project IRR, Equity IRR | Quarterly |
| Strategy | Pipeline, group-wide guarantee obligations | Quarterly |
Apply the principle of clarity: the five key figures at the top, compared with budget and the prior year, a 12-month trend, green, amber and red statuses, and the same format every month.
Variances you must be able to explain
| Size of variance | Action |
|---|---|
| <5% | Monitor |
| 5–10% | Explain in the management report |
| 10–20% | In-depth analysis with an action plan |
| >20% | Urgent review and notify the board |
Significant items must answer four questions: what happened, why, what the impact is, and what will be done next.
Who needs what
| Report recipient | Main topics | Frequency (example) |
|---|---|---|
| CEO/MD | Revenue, EBITDA, cash, pipeline | Monthly |
| Board | ROE, ROIC, strategy, risks and approval requests | Quarterly |
| Project Manager | SPI, CPI, Progress, Cost Variance | Monthly |
| Bank | Progress, sales, compliance certificate and financial statements | Monthly, quarterly, annually |
| Investors | IRR, MOIC, DPI, TVPI, Capital Account | Quarterly |
Compliance Certificate
The CFO signs to confirm the Covenant calculation results. The certificate must include the reporting period, the formula, supporting figures, confirmation of non-financial conditions, representations and a no default statement. Formulas must follow each agreement; if agreements differ, use separate tables.
Covenant levels in the consolidated statements and at SPV level may not match. The group can look strong while one SPV is close to breaching its terms. Report both levels, together with the headroom of each borrower.