Consolidated statement of financial position Flashcards
Mechanics of consolidation: The 5 standard workings are
Group structure - What percentage is owned
Net assets of subsidiary
Goodwill
Non controlling interest
Consolidated reserves
The non-controlling interest at acquisition can either be measured at:
fair value (either given in question or sufficient detail to calculate)
its proportionate share of the fair value of the subsidiary’s net assets at the acquisition date.
Negative goodwill (a gain on bargain purchase) is credited to the statement of X, and therefore added to X
profit or loss
Retained earnings
Be careful when dealing with goodwill impairment in retained earnings:
deduct P% if the NCI was valued at fair value
deduct in full if the NCI was valued using the proportional method (Proportional = Parent)
When calculating goodwill, purchase consideration is measured at
fair value.
for the method of payment show the measurement and journal of the fair value for:
A - Cash at acquisition
B - Deferred cash
C - Shares at acquisition
D - Deferred shares
E - Contingent consideration
A - Cash paid. Dr Cost. Cr Cash
B - Present value (using equation). Dr cost. Cr Liability
C - Fair valuye at Aq. Dr Cost. Cr Share capital. Cr share premium
D - Share value at aq. Dr Cost. Cr Other components of equity
E - Fair value. Dr Cost. Cr Liability/equity.
IFRS 3 requires that the subsidiary’s assets and liabilities are recorded at
their fair values in order to calculate goodwill.
Fair value of consideration for Goodwill calc is?
The purchase cost
What is the difference between Fair Value calc for Goodwill and Proportional
Fair value = This is the amount paid divided by the holding amount and then multiplied by the NCI % holding
Proportional = The subs net assets multiplied by the NCI % holding
Trading balances - you must remove both the
Asset and the liability
Where asset and liability are not equal, adjust for?
cash and/or goods in transit
before removing the balanced asset and liability
Where cash is paid or goods despatched by one group company before the reporting date but not received by the other until after the reporting date, then the intra-group balances will not agree. The adjustments necessary will
amend the balances as if the cash/goods had been received, then cancel the reconciled balances.
Which business do you adjust for cash in transit?
the recipient company. You Dr Cash and Cr receiveables
How do you account for good in transit
Dr inventory
Cr Payables
When there is an intergroup transfer of inventory you adjust the
Sellers accounts
When there is an intergroup transfer of non current assets you adjust the
Seller for profit (Dr) and recepient depreciation adjustment (Cr)
What is a PUP
Provision for Unrealised Profit
What is the impact of a PUP adjustment for inventory
The impact is to reduce the value of inventory to its group cost and reduce the retained earnings of the selling company. If the parent is the seller reduce W5, and where the subsidiary is the seller reduce the Reporting Date column in W2.
At the reporting date if a group company holds a non-current asset purchased from another group company, the profit included within that non-current asset needs to be
removed to reduce the carrying amount of the asset to its carrying amount based on cost to the group. This achieved by means of a Provision for Unrealised Profit (PUP) adjustment, reducing the carrying amount and adjusting retained earnings.
The seller’s retained earnings are reduced by the total original profit on the asset, while the purchaser’s retained earnings are increased by the value of the excess depreciation charged.
