Consolidated Financial Statements

Question 1

Accounting for partially owned subsidiaries

Even if the parent owns <100%, we still apply…?
Why is the non-controlling interest calculated?
Sometimes you may need to work out…?

Answer 1

• Even if the parent owns <100%, we still apply line-by-line consolidation in full to reflect control vs. ownership
• The non-controlling interest is calculated to show this distinction between resources controlled and owned
• Sometimes you may need to work out the parent’s % holding in a subsidiary yourself

Question 2

Example of group structure working

• P’s SOFP shows: Investment in S, at cost (14 million shares) is £21m
• S’s SOFP shows: Ordinary shares (50p per share) total £10m

What % of the ordinary shares of S does P hold?

Answer 2

S’s share capital: £10m/0.50 = 20m shares
P owns 14m/20m shares = 70%

Question 3

Consolidated Statement of Financial Position Question Technique (6 steps)

Answer 3

1. Establish group structure
2. Set out net assets of the subsidiary (/ies)
3. Calculate goodwill (if any)
4. Calculate any accounting policy adjustments
5. Calculate non-controlling interest at year-end (if any)
6. Calculate retained earnings