14. Group Accounts: Consolidated SF Position Flashcards
Consol: The 5 basic consol SFP workings
- Group structure
- Net assets of the sub(s)
- Goodwill
- NCI
- Group retained earnings
Consol: Net assets of sub: How to calculate to make it quicker?
Equity
Consol: Net assets of sub: At which 2 dates
- Reporting date
- Acquisition date
(I.e. reporting and post-aquis movement)
(So 3 columns actually (+ PA mov))
Consol: Net assets of sub: Which 2 are the same at both dates?
- Share capital
- Share premium
Consol: Net assets of sub: Which 2 do you need to know the post acquis amount too? (For dates)
- Reval surp
- Retained earnings
Consol: Goodwill: Where is the consideration?
Net assets on acquisition
Aka investment in S
Consol: Goodwill (at Acq): Calculation
Consideration
PLUS
NCI’s Sh of S’s NAs @ Acq
MINUS
100% of S’s NAs @ Acq
Consol: Goodwill: How to deal with subsequent things after Acq e.g. impairment
Add for each year to reporting date
(Because cumulative)
Consol: What to do if goodwill negative?
IFRS
- Rename: Gain on bargain purchase
- Recognize profit immediately in P&L
Consol: What to do if goodwill negative?
UK GAAP
Amortize negative goodwill
Consol: NCI calculation
NIC’s % of S’s NA @ Reporting
Consol: Retained Earnings calculation
100% P’s RE
PLUS
P’s % NA & RE
(MINUS Goodwill Impairment)
(PLUS Gain on bargain purchase)
Consol: What to do if acquisition part way through period and acquisition cost not given?
Pro-rate
Consol: The 2 types of intra-group transaction?
- Loans
- Trading
Consol: What to do about intra-group interest
Cancel out the finance income/cost
Consol: Intra-group loans: What to do about unpaid interest?
Remove
Consol: Intra-group trading: How to deal with timing differences e.g. cash in transit?
Treat as received
Consol: General aim with intra-group transactions?
Cancel out
Consol: Adjusting cash in transit DE
DR Cash in transit
CR Receivables current account
Consol: Adjusting goods in transit DE
DR Inventory
CR Payables current account
Name of the intra-group receivable and payable accounts?
‘Current’ account
Consol: Provision on unrealized profit: Sub sold all goods outside group
No adjustment needed
(But original sale still needs to be eliminated)
Consol: Provision on unrealized profit: Sub not sold all goods outside group
Adjustment needed
PURP adjustment DE
DR COS of seller
CR Inventory
Consol: PURP: Difference when the seller is the parent?
The profit is shared (i.e. reduced) with the NCI
Consol: Goodwill: What is fair consideration value for: Deferred cash
Present value
At acquisition
Consol: Deferred cash consideration: DE
- DR cost of investment
CR Liabilities - (Unwind:)
DR Finance cost
CR Liabilities
Consol: Goodwill: What is fair value consideration for: Shares
(Issues immediately OR deferred)
Market value
At acquisition
Consol: Goowill: Share consideration: Issued immediately DE
DR cost of investment
CR Share capital
CR Share premium
Consol: Goodwill: Share consideration: Deferred DE
DR cost of investment
CR Shares to be issued
Consol: Goowill: What is fair value consideration for: Contingent consideration
Fair value (given in the question)
Consol: Goodwill: Contingent consideration: Cash: DE
DR cost of investment
CR Provision
Consol: Goodwill: Contingent consideration: shares DE
DR cost of investment
CR shares to be issued
Consol: At what date only will the (fair value of) NIC be taken
Date of ACQUISITION
Consol: What else can you use in the goodwill calc instead of NCI’s% of NA @ Acq? (Fair value method)
Fair value of NA @ Acq
Consol: Goodwill impairment DE: Proportionate Goodwill calc method
DR Retained earnings (W5)
CR Goodwill (W3)
Consol: Goodwill impairment DE: Proportionate Fair-value calc method
DR Retained earnings (W5)
DR NIC (their share of the g/w (W4)
CR Goodwill (W3)
Consol: Does goodwill at fair value include the NIC’s share of the goodwill?
Yes
Consol: Does goodwill at the proportional method include the NIC’s share of the goodwill?
No
Consol: Methods of calculating goodwill: IFRS
- Fair value
- Proportional
Consol: Max goodwill life: IFRS
Unlimited
Consol: Goodwill: Method of impairment IFRS
Annual impairment review
Consol: Goodwill: Maximum life: UK GAAP
10y
Consol: Goodwill: Impairment method: UK GAAP
Amortization over useful life
Consol: Goodwill: Impairment method: UK GAAP
Amortization over useful life
Consol: Methods for calculating goodwill: UK GAAP
Only proportionate
Consol: intra-group transfers of NCAs calculation
CA of NCA at y/e
LESS
CA of NCA at y/e if transfer had not taken place
Consol: Intra-group transfer of NCAs treatment
DR seller’s R.E.
P - (W5)
S - (W2)
CR NCA on CSFP
Consol: Acquisition costs: Treatment of professional fees and other incremental costs?
Expensed in period
Consol: Acquisition costs: Treatment of share issue costs treatment?
DR share premium
Consol: Treatment of changes is fair value of contingent consideration?
Adjusted prospectively
(Change in accounting estimate)
Consol: Treatment of changes is fair value of contingent consideration: Exception
When the change related to conditions that existed at the acquisition date
AND
Occurs within 1y from acq date
In that case: retrospectively adjust
With a CORRESPONDING ADJUSTMENT TO GOODWILL
Consol: Treatment of changes is fair value of contingent consideration: Treatment if contingent consideration is in shares
(I.e. classified as equity)
Not remeasured
Instead:
Subsequent settlement recongnised as part of equity
Consol: What value to recognise assets at?
- Identifiable assets, liabilities and contingent liabilities of the acquiree
- At fair value
- At date of acquisition
Consol: How to include fair value in the workings: At acquisition
Adjust the net assets workings (W2)
To bring the assets to fair value
(This will affect goodwill)
Consol: How to include fair value in the workings: At reporting date
Adjust on the face of the CSFP
AND
in the net assets working
(Which will affect W4 NCI)
Consol: Places to adjust for fair value
At acquisition: Net assets
At RD: Net assets AND CSFP
Consol: Fair value: Depn treatment
Charged on fair value adjustments from the point of acq
Consol: Treatment: Goodwill in S’s accounts
E.g. from purchase of sole trader
Removed from NAs (W2)
Must not appear on CSFP
Consol: Treatment: Intangibles not recognized in S
(Because do not need IAS)
FV should be recongised in NAs and CSFP
(Put it in the brackets)
Consol: Treatment: Contingent liabilities disclosed in S’s books
Should be included in SCFP and W2 (NAs)
At fair value
Consol: What to do if FVs not known at RD after Acq?
Provisional FVs
Consol: Adjusting provisional FVs: Made within measurement period
Adjustment made retrospectively
Goodwill recalculated
Consol: Adjusting provisional FVs: Measurement period
12m from acq date
Consol: Adjusting provisional FVs: Made outside measurement period
- Treated as change in accounting estimate
So adjusted prospectively - Impairment review performed
Consol: UK GAAP difference: Acq costs
Included within consideration
Not treated as expense in period
Consol: UK GAAP difference: recognition of identificable intangible assets
MUST recognise identifiable intanglbes of the qcuiree separsately from goodwill
IF:
- Meet recongitoin criteria
(probable economic benefits wil flow & FV can be measured reliably)
AND
- Separable
AND
3, Arise from contractual or other legal rights
