7. Consolidated financial statements Pt 2 Flashcards
Who do the consolidated financial statements report transactions between?
They report only the effects of transactions between the group and entities outside the group.
Where adjustments affect the carrying amounts of assets and liabilities, do further adjustments have to be made for the tax effect of those adjustments.
Yes
Are adjustments required for both previous period transactions and current period transactions?
Yes
What current accounts are affected by adjustment for current period inventory transfers?
They affect current period profit accounts such as sales and cost of sales.
What happens when there is unrealised profit remaining in inventory?
The carrying amount of inventory is affected and a tax-effect adjustment is required.
What do adjustment for prior period inventory transfers relate to?
Prior period profits remaining in opening inventory, with adjustments being made to retained earnings.
True or False?
Adjustments for the gain/loss on sale of property, plant and equipment are made in all periods in which the assets are within the group.
True
Is a gain/loss on a sale realised in the group?
Yes, as the asset is used up by the group, with profit being realised in proportion to the rate of depreciation of the asset.
How are transferred assets depreciated?
Where the transferred assets are depreciable, adjustments are made to depreciation accounts, the adjustments being in proportion to the gain/loss on sale.
Does there have to be consideration when the seller classifies the asset as PPE?
Where the seller classifies the asset as property, plant and equipment and the acquirer as inventory, depreciation adjustments may be necessary.
True of False?
In a period subsequent to the original transaction, in adjusting for the gain/loss on sale, the classification of the transferred asset as inventory or property, plant and equipment is irrelevant.
True
What statements do adjustments for intragroup services affect?
They may affect only statement of financial position accounts, or only statement of profit or loss and other comprehensive income accounts.
Are profits/losses on intragroup services immediately realised to the group?
Yes
Is it necessary to have a tax-effect adjustment when adjusting for intragroup transfers of services?
Generally no.
How are dividends from subsidiary equity recognised?
As revenue by the parent and do not affect the investment in the subsidiary.
Are there are no tax-effect entries relating to adjustments for dividends?
Generally yes
Do consolidated financial statements show only the effects of dividends paid or payable to entities outside the group?
Yes
Do adjustments affect both dividend accounts?
Yes, adjustments affect both the dividend accounts raised by the subsidiary and those raised by the parent.
What do intragroup borrowings result in?
Assets in one member of the group and liabilities in another.
Is there a tax effect on entries relating to adjustments?
Generally there are no tax-effect entries relating to adjustments for intragroup borrowings.
How are interest payments accounted for in a group?
Interest payments result in revenues in one member of the group and expenses in another.
