22. Group Accounts: The Consolidated Statement of Financial Position (1) Flashcards
What are consolidated accounts?
A set of accounts prepared for a group containing multiple companies, as a whole.
When are consolidated accounts required?
When a company controls other companies (usually when one company owns more than 50% of the ordinary share capital of the other company)
What is a parent company?
The company that controls the other company.
What is a subsidiary company?
The company that is controlled by the parent company.
What is a group?
The parent company plus its subsidiaries.
What is non-controlling interest?
The part of the subsidiary that is owned by others, if the company doesn’t have 100% control.
What are pre-acquisition profits?
The profits earned by the subsidiary before the date of acquisition.
What is the purchase price paid by the parent company?
Share capital + pre-acquisition profits + fair value adjustment + Goodwill arising on consolidation
What are two reasons the parent company might pay more for a company than share capital + pre-acquisition profits?
- If the non-current assets are worth more than the carrying value. (Fair value adjustment?
- To take into account the goodwill of the subsidiary
How do you calculate retained earnings for the subsidiary on the consolidated statement of financial position?
Retained earnings of the subsidiary as an individual - pre-acquisition profits
What is Goodwill arising on consolidation?
The excess paid to acquire a subsidiary above its fair value.
Where does Goodwill arising on consolidation appear in the financial statements?
It does not appear in the financial statements for the individual companies.
It appears in the consolidated statement of financial position as an asset.
