Chapter 15 - Group Accounts, Consolidates Statement of Financial Position

Question 0

(W2) NET ASSETS OF SUBSIDIARY

Answer 0

At reporting date | At acquisition date | Post acquisition

Share capital
Share premium
Reserves:
   Retained earnings
   Revaluation reserve

Question 1

WHAT ARE THE 5 WORKINGS CREATED WHEN PREPARING A CONSOLIDATED STATEMENT OF FINANCIAL POSITION?

Answer 1

(W1) Group structure
(W2) Net assets of subsidiary
(W3) Goodwill
(W4) Non-controlling interest (NCI)
(W5) Group retained earnings

(W6) Other reserves

Question 2

(W3) GOODWILL ON ACQUISITION

Answer 2

£
Consideration paid x
Add: NCI% x net assets at acquisition (W2) x
Less: 100% x net assets at acquisition (W2) x
Goodwill on acquisition X
Impairment to date x
Goodwill c/fwd on CSFP X

Question 3

(W4) NON-CONTROLLING INTEREST

SHARE OF NET ASSETS METHO

Answer 3

NCI% of S's net assets at 
reporting date (W2)                   x

Question 4

(W5) GROUP RETAINED EARNINGS

Answer 4

100% P’s retained earnings x
P% of S’s post acquisition retained earnings (W2) x
Less: Goodwill impairment to date (W3) (x)
Add: Any gain on bargain purchase (W3) x
X

Question 5

THE NON CONTROLLING INTEREST

THE FAIR VALUE METHOD

Answer 5

NCI share of net assets (W2)
NCI share of goodwill:
   FV of NCI @ acquisition date
   Less: NCI% x S's NA's @ acquisition
   Less: NCI share of impairment 

NCI @ Reporting Date

Question 6

ACCOUNTING FOR THE COST OF CONSIDERATION

CASH CONSIDERATION

Answer 6

DR Cost of investment
CR Cash

At cash amount

Question 7

ACCOUNTING FOR THE COST OF CONSIDERATION

DEFERRED CASH CONSIDERATION

Answer 7

Some of the cash consideration may be deferred until a later date.

DR Cost of investment
CR Liabilities

This should be included at present value.

Question 8

ACCOUNTING FOR THE COST OF CONSIDERATION

SHARE CONSIDERATION

Answer 8

There may be a share-for-share exchange instead of a cash payment.

DR Cost of investment
CR Share capital
CR Share premium

This should be recorded at market value at date of acquisition.

Question 9

ACCOUNTING FOR THE COST OF CONSIDERATION

DEFERRED SHARE CONSIDERATION

Answer 9

There may be a share-for-share exchange instead of a cash payment which may also be deferred.

DR Cost of investment
CR Shares to be issued

This should be recorded at market value at the DATE OF ACQUISITION.

Question 10

ACCOUNTING FOR THE COST OF CONSIDERATION

CONTINGENT CONSIDERATION

Answer 10

This is an amount which may be payable at a later date in respect of the purchase of an investment, dependent on certain events e.g extra amount paid for subsidiary achieving specified level of sales growth in next 5 years.

Contingent cash/ shares
DR Investment
CR Provision/ Shares to be issued

This should be recorded at fair value at the DATE OF ACQUISITION which shall be given in the exam.

Question 11

WHERE DO YOU PUT THE ACQUISITION OF INVESTMENT COSTS?

Answer 11

IFRS:
-Professional fees and other similar costs incurred directly
in making the acquisition must be recognised as expenses
in the period of acquisition.
-Share issue costs should be debited to the share premium
account.

UK GAAP:
-Acquisition costs are capitalised as part of the investment,
they affect goodwill.