10. Group Accounts - The Consolidated Statement Of Financial Position

Question 1

When is control established between a parent and a subsidiary?

Answer 1

When the parent owns more that 50% of the voting power.
Or if the parent owns less than 50%:
- they must have more than half the voting right by virtue of agreement
- the power to govern the financial and operating activities
- power to appoint or remove the majority of members of the board of directors
- power to cast the majority of voters at the meeting of the board of directors

Question 2

What are the rules for group SOFP?

Answer 2

• investment in the subsidiary never appears
• share capital is the parent company only
• assets and liabilities are added together
• goodwill needs to be calculated and shown in intangibles
• retained earnings needs to be calculated

Question 3

What does IFRS10 state?

Answer 3

Consolidated financial statements are produced by the parent in addition to their single entity statements and are for the shareholders of the parent company. Uniform accounting policies are required

Question 4

Should goodwill be amortised?

Answer 4

No, it should be considered for impairment

Question 5

What are the three things that need adjustments in the consolidated accounts?

Answer 5

1. Inter company transactions
2. Provisions for unrealised profit
3. Fair values

Question 6

What are provisions for unrealised profit?

Answer 6

Where inter company sales are made at a profit and some inventory remains in stock.