11. Consolidated Statement of Profit and Loss

Question 1

What are the basic principles of a consolidated SPLOCI

Answer 1

• Substance over form
• Income, expenses and other comp income are added line by line
• Ownership is reflected at the bottom

Question 2

How is allocation of profit and Total comprehensive income

Answer 2

Consolidated PFY and TCI are split between:
- Non controlling interests
- Owners of the parent

Question 3

How are dividends from the subsidiary’s treated in consolidated SPLOCI

Answer 3

• Cancelled out on consolidation as it is showing the legal form
• Replaced with the profit of the subsidiary

Question 4

What is the NCI working for profit and total comprehensive income

Answer 4

PFY/TCI

(- Less impairment loss on goodwill for the year (IF NCI measured at FV)
- Less provision for unrealised profit (IF subsidiary is seller)
- Fair value adjustments for year)
x NCI %

Question 5

What is the format of the SPLOCI

Answer 5

Revenue
Less Cost of sales
= Gross profits
Less distribution costs
Less Admin costs
Plus Dividends
=Profit before tax
Less tax expense
= Profit for year
Plus Other Comp Income
= Total Comp Income

Question 6

How is goodwill impairment recognised in SPLOCI

Answer 6

• Only one years of good will be recognised as it related to the transactionsin the year

Question 7

How do you calculate NCI at partial goodwill method for goodwill impairment

Answer 7

• NCI measured at % of fair value of net assets
• Add all of the impairment loss for year
• No impact on NCI as all goodwill relates to group

Question 8

How do you calculate NCI for goodwill impairment at the full goodwill method

Answer 8

• NCI measured at fair value given
• Add all imapirment loss for year
• NCI Working: deduct imapirment loss fo ryear and multiply by NCI %
  -Group working: multiply by group %

Question 9

What is the working for consolidated P&L for intra-group trading

Answer 9

Revenue
Less cost of sales:
=Gross profit

Question 10

How do you work out cost of sales

Answer 10

Opening inventory
Add purchases
less closing inventory

Question 11

What are the two issues intragroup trading casues

Answer 11

• Unrealised profit
  -Overvalued stock

Question 12

What are accounting entries for consolidating intra group trading

Answer 12

1. Remove transaction
   Debit Revenue (decrease)
   Credit Cost of sales (decrease)
2. Remove unrealised profits
   Credit Inventory (decrease in SOFP)
   Debit Cost of sales (Increase)

Question 13

Where is unrealised profit recognised

Answer 13

In cost of sales - add back the ‘profit’ to the cost

Question 14

What fair value adjustments cause movements in SPLOCI

Answer 14

Sale of inventories
Depreciation/Amortisation
Disposal of PPE/Intangible assets
Settelment of contingent liabilities

Question 15

Where does each movement of FV affect in the SPLOCI

Answer 15

• Changes in inventory: COst of sales
• PPE: Cost of sales, Distribution costs or Admin costs
• Intangible assets: Cost of sales, distribution or admin costs
• Contingent Liabilities: Admin costs