C8 - Consolidated FS Flashcards
What are Consolidated financial statements?
Where one company (the parent) owns or controls one or more other companies (subsidiary)
What does IAS 3 business combinations mean?
A set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends or other economic benefits directly to investors.
Under IAS 3 business combinations, how is a parent described?
A transaction or other event in which the acquirer obtains control of one or more businesses.
Definition of a parent
An entity that controls one or more other businesses
What is a subsidiary?
An entity that is controlled by another business
What is a group company
A parent and its subsidiaries put together
What is non controlling interest (NCI)
Equity in a subsidiary not attributable directly or indirectly to a parent. (Outsiders)
How are financial statements consolidated for a parent and subsidiary entity?
All assets, liabilities, expenses and income are added together from the parent and subsidiary
What are the three major calculation is used in the preparation of consolidated statement of financial position
Goodwill - date of acquisition of the subsidiary
Post acquisition profits - date of acquisition of the shares in the subsidiary
NCI - stake of other shareholders in the subsidiary at the date of the consolidated statement of financial position
Step 1 of consolidation FS
Establish the group structure
- Who is the parent
- Who is the subsidiary
- Percentage of control over subsidiary
- Date of acquisition
- Date of consolidated fs
How to calculate goodwill for subsidiary?
Investment from parent is offset against share capital and retained earnings.
Consideration (investment) - net assets acquired (sc + re) = goodwill
First steps for consolidating fs
Work out % company owns on subsidiary = shares acquired / share capital = %
