Consolidated Financial Statements in Egypt: When and Who Is Included
When must an Egyptian parent prepare consolidated statements, and who is in them? EAS 42 ties consolidation to control; the Companies Law regulations and listing rules add duties.
By Accounting & Bookkeeping Department · 15 October 2026 · 7 min read
Executive summary
- "Every parent entity shall prepare consolidated financial statements" (Egyptian Accounting Standard 42, paragraph 4). A parent that is itself a subsidiary is exempt if four conditions are all met, one being that its ultimate or intermediate parent prepares consolidated statements that comply with the Egyptian standards and are available for public use in the Arab Republic of Egypt.
- Article 188 of the executive regulations of Law 159 of 1981 requires holding companies to prepare consolidated statements under Annex 5, and excepts banks and insurance and reinsurance companies.
- Article 47 of the rules for listing and delisting securities on the Egyptian Exchange (the listing rules) requires "companies obliged to prepare consolidated financial statements" to file their separate and consolidated statements annually with the Financial Regulatory Authority and the Exchange, and their consolidated statements quarterly within sixty days at most.
- Income tax is imposed on the net profits of each legal person (Law 91 of 2005, article 47), and the law contains no provision for a group return.
Who must prepare consolidated statements
The text in force is EAS 42 "Consolidated Financial Statements" as amended in 2019 (Decree 69 of 2019 of the Minister of Investment and International Cooperation), for periods beginning on or after 1 January 2020 (paragraph C1). No later decree has amended it, up to the most recent amending decree, Prime Minister's Decree 3527 of 2024.
A parent need not prepare them if four conditions are all met (paragraph 4(a)): it is itself a subsidiary of another entity, and its other owners, including those without voting rights, have been told it will not prepare them and have not objected; its debt or equity instruments are not traded on a domestic or foreign exchange or over the counter; it has not filed, and has not begun to file, its statements with the Financial Regulatory Authority or any other regulator in order to issue financial instruments on an exchange; and its ultimate or intermediate parent prepares consolidated statements "that comply with the Egyptian Accounting Standards and are available for public use in the Arab Republic of Egypt". An investment entity that is required to measure all its subsidiaries at fair value through profit or loss does not prepare consolidated statements (paragraph 4B), and its definition requires it to be supervised by the Financial Regulatory Authority as an entity subject to the Capital Market Law, Law 95 of 1992 (paragraph 27(d)).
On our reading of the fourth condition, an Egyptian intermediate parent in a foreign group is not exempt merely because its foreign parent publishes consolidated statements under IFRS. See how the Egyptian standards differ from IFRS, first-time adoption of IFRS and bookkeeping for foreign companies.
| Text | Addressed to | What it requires |
|---|---|---|
| EAS 42, paragraph 4 | "every parent entity" | Consolidated statements unless an exemption applies |
| Egyptian SME standard, paragraphs 9-2 and 9-3 | Every parent that applies that standard | Consolidated statements except in the two cases in paragraph 9-3 |
| Companies Law regulations, article 188 and Annex 5 | Holding companies, except banks and insurance and reinsurance companies | Consolidated statements on the Annex's terms and conditions |
| Listing rules, article 47 | "companies obliged to prepare consolidated financial statements" | Filing separate and consolidated statements with the Authority and the Exchange |
Part two of Annex 5 sets two cases in which consolidated statements must be prepared: where "the company and its shareholders own more than half of the capital of one or more subsidiaries", or where they hold shares in another company "and control the formation of its board of directors". This test is worded differently from the standard's, and in our view both should be checked.
Control: three elements together
"An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee" (paragraph 6), and all three elements must be present (paragraph 7). Under the heading "Power", paragraph 10 provides that the investor controls the investee "when the investor has existing rights that give it the current ability to direct the relevant activities"; power arises from rights, such as voting rights or contractual arrangements (paragraph 11), and an investor that holds only protective rights does not control (paragraph 14).
Who is consolidated and who is equity-accounted
| Relationship | Standard | Treatment in the consolidated statements |
|---|---|---|
| Subsidiary (control) | 42 | Consolidated from the date control is obtained until it is lost (paragraph 20) |
| Associate (significant influence) | 18 | Equity method unless the investment qualifies for exemption (paragraph 16) |
| Joint venture (rights to net assets) | 43 and 18 | Equity method unless the entity is exempt (EAS 43, paragraph 24) |
| Joint operation (rights to assets, obligations for liabilities) | 43 | The joint operator recognises, in relation to its interest, its assets, liabilities, revenue and expenses, including its share of those held or incurred jointly (paragraph 20) |
Significant influence is presumed where 20% or more of the voting power is held directly or through subsidiaries, "unless it is clearly shown that no such influence exists" (EAS 18, paragraph 5). Joint control "exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control" (EAS 43, paragraph 7).
The mechanics in brief
- Eliminations: the parent's investment in each subsidiary is eliminated against its share of the subsidiary's equity, and assets, liabilities, equity, income, expenses and cash flows relating to transactions between group entities are eliminated in full (paragraph B86).
- Uniform policies for like transactions (paragraphs 19 and B87).
- One reporting date; otherwise the subsidiary prepares additional information as of the parent's date unless that is impracticable (paragraph B92), and in all cases the difference between the two dates may not exceed three months (paragraph B93). Annex 5 likewise requires a single financial year-end, except for the first financial period, and where that cannot be achieved the reason and its justification are disclosed.
- Non-controlling (minority) interests are presented in the consolidated statement of financial position within equity, separately from the equity of the parent's shareholders (paragraph 22; see complete financial statements), and are attributed their share of total comprehensive income even if this results in a deficit balance (paragraph B94).
Translating a foreign subsidiary's statements for consolidation is covered in the bulletin on foreign currency translation and exchange differences.
Tax: each company is a separate taxpayer
"An annual tax is imposed on the total net profits of legal persons, whatever their purpose" (article 47 of Law 91 of 2005), and these include "capital companies and partnerships, whatever the law that governs them" (article 48). Article 51 refers the determination of net income to the rules for commercial and industrial activity where there is no specific provision, and those rules include that "net profit is determined on the basis of the income statement prepared in accordance with the Egyptian Accounting Standards" (article 17).
The law contains no provision for a group return or for setting one company's loss against another group company's profits. The nearest text is article 29, which deducts a year's loss from the profits of following years "until the fifth year", with no reference to another person's profits. Read together, these texts mean that each company's tax base starts from its own income statement, not from the consolidated statements.
Where related persons set terms in their commercial or financial dealings that differ from those between unrelated persons and that "reduce the tax base or shift its burden from a taxable person to another that is exempt from it or not subject to it", the Egyptian Tax Authority may determine the taxable profit "on the basis of the arm's length price" (article 30; see transfer pricing). Item 10 of article 50, as replaced by Law 151 of 2026 (the amendments), exempts dividends that a parent or holding company receives from resident and non-resident subsidiaries on two conditions: its holding is not less than 25% of the subsidiary's capital or voting rights, and it has held that percentage for at least two years or undertakes to keep it for two years from acquisition. Article 56 bis, as now worded, excludes dividends that resident legal persons receive from other resident legal persons, and the related cost, from the corporate tax base "as specified in the executive regulations of this law".
What this requires
- Classify each investment (control, significant influence, joint control) under the standard and the two cases in Annex 5, and reassess control whenever facts and circumstances indicate a change in one of its elements (paragraph 8).
- Align accounting policies and year-ends, and reconcile intragroup balances and transactions before the close.
- For companies under the listing rules: meet the deadlines in articles 46 and 47 and attach the auditor's report, with the board report for the annual statements (see statutory audit and the forms of auditor's opinion).
- Prepare each company's tax return from its own statements, and check both conditions of article 50, item 10 before treating any dividend received as exempt.
The firm's Accounting & Bookkeeping Department defines the consolidation scope, prepares the consolidated statements and reconciles transactions between group companies before they go to the auditor.
Nehal Saied, Partner
Chartered Accountant, Ministry of Finance, Egypt
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation
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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.