Ch18 - Consolidated SoFP

Question 1

W2 - Net Assets of Subsidiary

Answer 1

Share Capital - Acquisition and reporting date - doesn’t change - if not given see bottom. Use NCI at acquisition
Share Premium - Acquisition and reporting date - doesn’t changes
Retained Earnings - Acquisition and reporting date - can change. Acquisition given in Q usually, not given but in table as this + last year then add together
Other Equity
FV Adjustments - Acquisition and reporting date
FV Depreciation - Reporting date only
Less: PURP if S is seller - reporting date only (inventory)
Less: PURP if S is seller - Reporting date only (transfer of asset)

Question 2

W3 - Goodwill

Answer 2

Fair value consideration at FV - made up of cash paid, share issue, deferred cash, deferred shares, deferred contingency
NCI at acquisition - FV given. Proportionate = Net assets at REPORTING DATE*NCI% - DOUBLE CHECK
Less: subsidiary’s assets at acquisition (W2)
Less: Goodwill impairment full value

Question 3

W4- - NCI

Answer 3

NCI At acquisition (same as above)
NCI % * Post acquisition reserves W3
NCI% * Goodwill impairment

Question 4

W5 - Group Retained Earnings

Answer 4

100% P Reserves from table + (Add last year + this year if given)
P% * Post acquisition reserves W3
P%* Goodwill impairment
Less:PURP if P is the seller (inventory)
Less: PURP if P is seller (Transfer of asset)
Deferred Consideration Interest (total amount with interest - SoFP)

Question 5

Consideration

Answer 5

Cash: Dr FV Consideration (W3), Cr Cash (remove from investments on Cons SoFP)
Deferred Cash = Dr FV Consideration (W3), Cr Non-current Liability deferred consideration, unwind each each year Dr Finance Cost Cr NCL.
The interest portion also goes to W5 as a minus

Remove professional fees from consideration

Question 6

If cash value not specified in the question

Answer 6

Assume full purchase of whatever the investment on the balance sheet is

Question 7

Consideration: Shares and Deferred Shares

Answer 7

Shares: Find number of shares from balance sheet, 2 for 5 = /5*2, multiply by MV and also percentage of holding. Split between share capital and share premium using MV
Dr FV Consideration (W3), Cr Share Capital, Premium

Question 8

Contingent Consdieration

Answer 8

Dr Cost of investment (W3), Cr Liability/Equity

Question 9

NCI at acquisition if only share price given

Answer 9

Calculate shares from SoFPprice at acquisitionNCI percentage. FV method only

Question 10

Intragroup Transactions

Answer 10

If P owes S 400, but S recognises 500
Remove 400 from S’ receivables and from Current Liabilities
Remove 100 from receivables and add 100 to bank

Question 11

FV Adjustments, NCA and Depn of S

Answer 11

Calculate revalued amount as well as the Depn. Depn is only the revaluation amount.
The FV adjustment of Land/Plant goes to Acq and Reporting in W2
Depn goes to Reporting only

Add asset value to NCA, minus Depn

Question 12

Investment into S’ Loan stock

Answer 12

Find Loanstock value from SoFP of S, calculate the percentage of investment and minus this off Investments and NCL: Loan notes

Dr Investments (-)
Cr NCL - Loan notes (-)

Question 13

Sale of Goods: PURP - Inventory

Answer 13

If S sells to P, Cr W2 (reporting minus value), and Dr Cos (-)
If P Sells to S, Cr W5 (minus value), Dr Cos (-)

Calculate profit on the goods, and take the amount of goods left as a % on sale price and calculate the value of PURP

If cost plus 25%, divide by 125*25

Remember - only calculate profit on WHATS LEFT IN INVEN

Question 14

Mid-year Acquisition

Answer 14

This only affects the W2 value of retained earnings.

E.g. if Retained earnings are reporting date is $69k.
Mid year Acq, and profit of $9k, Acquisition date minus off the apportionment of the profit earned

Question 15

Transfer of Goods: PURP - Non-current assets

Answer 15

If P Transfers to S:

Calculate:

Carrying Amount, Depn, and Carrying amount
With, Without Transfer and the difference.

Dr W5 - Group Ret Earn with the $5k -
Cr W2 - Depn - the Depn Portion +
Cr PPE - The balance -

Question 16

Revaluation Surplus on subsidiaries

Answer 16

Add to reporting date if needed to require the Net assets at reporting date for proportionate method NCI - CONFIRM REPORTING OR ACQ
Leave from Post-acq reserves for W5

Question 17

Proportionate Method: Goodwill Impairment

Answer 17

Don’t multiply by P or S% - Ignore W4 - Keep as total
Dr W5
Cr W3

Question 18

Share for Share Exchange how to, for consideration

Answer 18

Take shares of subsidiary from SoFP
Multiply by fraction e.g. 2 for 3 = 2/3
Multiply by P% - the share capital of Sub*P% gives the shares taken for NCI
Multiply by market price of the PARENT

Question 19

Removing Investments on the SoFP

Answer 19

If the investment is specifically specified as the subsidiary, Remove it
If it isn’t - likely some to be left and remove the cash payment from it or other bits to leave some on the SoFP

Remove Subsidiary Consideration always
Dr W3, Cr Investments

Question 20

Share for share exchange - Value

Answer 20

If not given enough data to work out consideration e.g:
Market price of PARENT
2/3
Shares taken

Then use the value specified of the subsidiary on the SoFP. This is likely to be immediate and specified - remove it from the SoFP, but it gives you the consideration

Question 21

Always Remember Apportionment

Answer 21

If purchased 3 years ago asset - depn x3

Question 22

If Goodwill not given

Answer 22

Use the total of W3 and the percentage given

Question 23

Revaluation Surplus - Treatment of Subsidiary and W2 Usage

Answer 23

Usually a post-acq revaluation increase, use reporting date only of W2 - Only real use of this is if NCI is proportionate, or Net assets at acquisition W3
Remember to remove this to calculate post-acq reserves for W4/W5

On the SoFP - Multiply the Revaluation surplus by Parent %

Question 24

If NCI value given and it’s only an SoPL given

Answer 24

Multiply total shares*price e.g. $1 shares