2: Consolidated Statement of Profit or Loss (CSPL) Flashcards
What must you do to the consolidated statement of profit or loss if the subsidiary is acquired during the period? (<12 months)
Pro rate
What is the rule for the statement in regards to…
Intra group transactions?
They must be eliminated in full
What are the two things the CSPLOCI represent?
Ownership and control
How does the SPLOCI reflect control?
By combining the results of the parent with the results of the subsidiary (for the number of months it has been a subsidiary)
How does the SPLOCI reflect ownership?
By non-controlling interests being separately presented in the statement of profit or loss and other comprehensive income
By how many months can the parent and subsidiary’s year ends be within each other to consolidate.
3 Months
What is the rule for the statement in regards to…
Accounting policies?
They must be uniform between parent and sub.
How do you consolidate revenue?
- 100% parent
- 100% subsidiary (even if you own less than 100% of its shares)
- less the total of intercompany sales between the two entitles
How do you consolidate revenue for mid year acquisitions?
▪ 100% parent
▪ 100% subsidiary (even if you own less than 100% of its shares) x number of months it was controlled
▪ less the total of intercompany sales between the two entitles
What two factors must be represented in cost of sales?
PURP adjustments we make in
- Retained earnings
- NCI
How do you consolidate cost of sales?
- 100% parent
- 100% subsidiary (even if you own less than 100% of its shares) x n/12 if midyear acquisition
- less the total of intercompany sales between the two entitles (irrespective of whether in inventory at the end of the year)
- plus, the unrealised profit on inventory (ONLY if the items remain in inventory at the yearend)
What is the rule with dividend payments?
Dividends paid by the subsidiary to the parent should be eliminated upon consolidation from the parent’s investment income.
What are dividends paid by the subsidiary to the parent know as?
Intra-group investment income
If we have an impairment to goodwill, what must this be included as?
As an increase to administrative expenses.
If we have an fair value adjustment, where must we adjust this?
Adjusted at cost of sales unless told its admin expense.
What is the rule with Additional depreciation?
Will only relate to the subsidiaries assets so will always affect the NCI
calculation
What is the rule with PURP when the parent sells to the subsidiary?
The profit made is 100% group so no adjustment to NCI arises.
What is the rule with PURP when the subsidiary sells to the parent?
The profit made by the
subsidiary is partially owned by the group and partially owned by the NCI shareholders.
Is the associate consolidated into the P+L?
No?
Why is the associate not consolidated into the P+L?
Because it is not controlled.
What is the double entry for Investment in associate?
DR Investment in associate
CR Cash
What is the associate unrealised profit calculation?
PURP (calculated as normal) x group share
What is the double entry when Parent sells to the associate?
Dr Group cost of sales (cancel profit on goods still in the group)
Cr Investment in associate (reduce goods to cost to the group)
What is the double entry when Parent sells to the associate?
Dr Share of profit of associate (cancel profit on goods still in the group)
Cr Group inventory (reduce goods to cost to the group
