Consolidated Statement of Financial Position Flashcards
What is the pro-forma for Consolidated SFP’s
Non Current Assets
Goodwill (W3)
Tangible (100% P+S)
less Cost of Investment
Current Assets
Inventory (100% P+S )
Receivables (100% P+S - IC transaction - cash in transit)
Bank & Cash (100% P+S + cash in transit)
Share Capital (P only)
Share Premium (P only)
GRE (W5)
NCI (W4)
Non-Current Liabilities (100% P+S) Current Liabilities (100% P+S less IC transactions)
W1 and W2
W1 Group Structure
W2 Net Assets
Share Capital Share Premium Retained Earnings FV adjustment (less depreciation) (less PUP (upstream))
W3
W3 Goodwill
Cost of Investment
FV of NCI
(less FV of net assets @ acq)
= Goodwill on acquisition
(less impairment)
= Goodwill
W4
W4 NCI
FV of NCI
NCI% of post-acq profits
less NCI% of impairment (FV Method only)
= NCI
W5
W5 GRE
100% Parent Retained Earnings
Parent % of post-acq profits
less parent % of impairment
(less PUP (downstream))
What is the difference between purchased and negative goodwill?
Purchased goodwill is the difference between the purchase price and the FV of the assets, liabilities and contingent liabilities. This is recognised at cost and reviewed annually for impairment.
Negative goodwill arises when the purchase price is less than the fair value of the net assets required, which should be credited directly to P/L.
What are the two methods for Goodwill?
Fair Value Method
Proportion of net assets method - Here, the NCI’s holding is measured by calculating their share of the FV of Net assets at acquisition (W2).
What are the impacts of goodwill impairment on each method?
FV:
Dr NCI (w4) to reduce by NCI % of impairment loss Dr GRE (w5) to reduce by the parent's % of impairment loss Cr Goodwill (w3) by the full impairment loss
Proportion of Net Assets
Dr GRE (w5) by full impairment loss Cr Goodwill (w3) by the full impairment loss
How are intra group transactions cancelled out?
Dr Payables
Cr Receivables
Dr Bank
Cr Receivables
How is PUP accounted for?
Closing Inv x mark up/100+ mark-up
Selling price x margin %
P sells to S Downstream:
Dr W5 GRE
Cr Inv - SFP
S sells to P Upstream:
Dr W2 Net Assets
Cr Inv - SFP
What is the definition of fair value?
The amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties.
When does IFRS3/IFRS10 say fair value of subs should be adjusted?
Before goodwill is calculated
How should the following elements fair values be calculated?
Tangibles
Raw materials
Finished goods
Long term payable
Tangibles - Market Value
Raw materials - Replacement cost
Finished goods - Selling price minus profit allowance
Long term payable - Present value of future cash flows
How is depreciation calculated in W2?
FV adj
——— x no of yrs owned sub
Remaining UL
How is depreciation presented in W2?
Only deducted from SFP, not acquisition column
How is PUP presented in W2?
Only deducted from SFP, not acquisition column
How does IFRS3 treat direct costs of acquisition, such as professional fees?
No direct costs may be capitalised as part of the investment. All direct costs of acqusition should be expensed.
What is contingent consideration?
An obligation of the purchaser of an asset to transfer additional assets or equity to the seller if certain conditions are met.
It also may give the buyer right to return of consideration if conditions are not met.
How is PUP on Non-current assets accounted?
Any profit made on the transfer of non-current assets needs to be cancelled out and the asset reduced to cost to the group.
How do we work out PUP on non-current assets?
Step 1 - who sold to who?
Step 2 - profit element (selling price - CV = profit)
Step 3 - depreciation element (profit / remaining UEL)
Step 4 - remaining profit (step 2 - step 3)
Upstream
Dr Net Assets W2
Cr PPE
Downstream
Dr GRE W5
Cr PPE
How do we calculate share for share exchange (for cost of investment W3)?
No of shares purchased x share basis x share price of parent = value of investment
value of investment
—————————– = no of shares issued
share price of parent
Dr Cost of Investment W3
Cr Share capital of parent
(Cr Share premium of parent if extra)
