Chapter 14: Group accounts: consolidated statement of financial position Flashcards
How do you calculate goodwill in this scenario?
The consideration of £600,000 was made up of £400,000 cash payable immediately and a
further £200,000 payable on 31 December 2015 if the post-acquisition profits of Tobago Ltd exceeded a certain amount by that date.
At 1 January 2014 the probability of Tobago Ltd hitting the earnings target was such that the fair value of the possible cash payment was £100,000.
At 31 December 2014 the probability had risen such that the fair value of the possible cash payment was judged to be £150,000
Cash 400,000 Consideration 100,000 (FV of the possible cash payment) ------ (W1 Net assets) ------ NCI @ Acq (W1 x NCI %) = Goodwill
How do you calculate NCI of a subsidiary?
W1 x NCI %
Add: Share of post acquisition profits:
(W1, bottom right number x %)
How do you calculate the investment in associate when they have items with value in excess of CA and when they have items remaining from parent sale and where does this go?
Cost Add: Share of post-acquisition profits (Y/E Acq - RE at Acq) Less: FV Depreciation Less: Inventory PURP when P sells to A ------- This goes under Non-Current Assets in the COFP
How do you calculate the PURP when P sells to associate?
Normal PURP - Then multiply GP by percentage of goods left then times by % owned E.g: 100% 20,000 70% (14,000) GP = 6000
1/3 left
6000 x 1/3 = 2000
Investment = 35%
So 2,000 x 35% = 700 PURP
How do you account for this?: P selling to S
On 1 January 2014 Dominica plc sold a machine to Tobago Ltd for £180,000. The machine had a carrying amount in Dominica plc’s accounting records of £156,000. The estimated remaining useful life of the machine was reassessed on the date of sale at six years.
Y/E 31 December 2014
Asset now in Tobago Ltd’s accounting records at 180,000 x 5/6 years = 150,000
Asset would have been in Dominica’s accounting records at 156,000 x 5/6 years (130,000)
——–
20,000
This is then deducted from Retained Earnings
Why 5/6?: Because the 180,00- and 156,000 are the carrying amounts at the beginning of the year and we need to account for one years depreciation
How do you calculate goodwill with deferred consideration?
Cash Consideration (Amount left/1.discount factor) ----------- (Net assets W1) ---------- NCI @ acq (FV, this is given in question)
How do you do retained earnings with deferred consideration and a joint venture?
Parent Deferred consideration unwinding Subsidiary (RE post-acq x %) Investment in associate (Share of their post-acq profits) Add: Dividend paid by associate x P%
How do you calculate the investment in joint venture and where does this go?
Cost Add share of post-acq profits (RE/Profit given x P%) ------------ NCA
How do you calculate a PURP: sub to parent, cost given of products still held?
Cost (value given) - then normal PURP
How do you calculate goodwill when measured at FV?
Consideration transferred
FV NCI @ Acq
———–
(FV of net assets acquired and liabilities assumed W2)
How do you calculate gain on a bargain purchase?
Where do you use this and put this?
Where a subsidiary is bought on the first day of the year you should: Cash Deferred Consideration at PV (Money / Discount) NCI @ Acq @ FV ------------ Less FV of Net in W1
Deduct a profit from RE but add a loss
Where does deferred consideration go in the COFP? What does it consist of?
Current liabilities (check dates) Deferred consideration at PV (DC / discount) \+ Unwinding of discount
Which numbers do you combine in the COFP?
NCA:
PPE
CA:
Inventories
Trade Receivables
Cash and Cash equivalents
Current Liabilities:
Trade and Other payables
Taxation
