Consolidated Stmt of Financial Position Flashcards
When does goodwill occur?
- when value of business as a whole is greater than net assets been acquired
What is the pro forms for working out goodwill?
(always at acquisition date)
Fair value of consideration (investment)
Fair Value of non controlling interest
(fair value of net assets at acquisition)
- could be made of share cap, share Premium, RE, other reserves, fair value adjusts
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Goodwill
How is positive goodwill accounted for?
- capitalised as intangible non-current asset
How is negative goodwill accounted for?
- when acquired net assets exceed cost
- credit to profit or loss
What is non-controlling interest?
- equity in a subsidiary not attributable (direct or indirectly) to a parent
- non-group shareholders interest in net assets of subsidiary
Why is NCI included in group stmts?
this is included in group stmts in equity as shows extent to which assets/liabilities are controlled by parent but owned by other parties
How can the fair value of NCI be calculated if not given?
- number of shares multiplied by share price
What is the proforma to work out current NCI for group stmts?
NCI at acqn (from goodwill working)
NCI share of post acqn reserves (year end reserves - pre acqn reserves xNCI%)
NCI at year end
What does the assets and liabilities sections of group stmts show?
- what the group controls
What does the equity section of group stmts show?
- who actually owns the consolidated net assets of group
How are other reserves dealt with in group stmts?
- work out same as Retained Earnings
- show as separate lines
- any reserves there pre acqn will be included in goodwill calculation as net assets exceed cost
What happens if net assets have to be adjusted to be fair value for goodwill calculation?
- any differences between fair values of assets and carrying amounts in subs accounts are adjusted for
- must be in goodwill calc at fair value as value when company purchased
- only adjust in consolidated stmts, subs stmts do not need to change
What could the fair value of consideration consist of?
- consideration transferred will be same as figure recorded as cost of investment in parents stmts
- could consist of cash or shares
- fair value of shares is quoted share price at acqn date
What happens to any inter-company balances in consolidated stmts?
- all balances, transactions, income, expenses must be eliminated in full
- as being represented as one entity
What is the double entry to remove an inter-company balance?
DR inter company payable
CR inter company receivable
What are the two issues that arise when goods have been sold with a profit within the group?
- the group has made a profit from selling goods to itself, this is unrealised and must be eliminated
- if good bought still held at yr end inventories will be valued at cost to buyer but need to be valued at lower of cost and NRV TO THE GROUP
What are the two double entry adjustments for unrealised profit?
for group:
DR cost of sales (increase expenses, reduce profit)
CR inventories
this must then feed through to RE in FP
DR retained earnings of seller
CR Consolidated inventories
How is Retained Earnings calc affected by mid year acqns ?
- have to estimate net assets at date of acqn
- have to assume profits accrue evenly throughout year unless told otherwise
What is the proforma for working out retained earnings for mid year acqn?
Retained Earnings at begin period
for months that were pre acqn in the acqn yr (above /12 x months)
Pre Acqn Retained earnings
What is the approach to consolidated stmt of Financial Position?
- Make Group Structure
- work methodically- add across 100% assets and liabilities
- only include Parents Share Capital
- eliminate inter company balances (pay/receivables) (adjust unrealised profit)
- make fair value adjustments
- goodwill calculation
- retained earnings calculation
- Non- controlling interest calculation
What should a group structure show?
- What business bought the other
- % owned by parent
- acqn date
- pre acqn reserves
What is the proforma for unrealised profit adjustment?
Unrealised Profit on intracompany sales
%held at yr end inventories
= Provision for unrealised profit (PUP)
adjusted in company selling goods
What is the proforma for making a fair value adjustment for consolidated stmts?
Fair value of land & buildings
(carrying amount of land & buildings)
fair value adjustment - post to good will working and PPE
What is the proforma for consolidated retained earnings calculation?
RE per question for both
(Provision for unrealised profit (sellers columns only)) )
(pre acqn RE)
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post acqn RE
Group share % x post acqn RE
What is the double entry to eliminate intra group revenue/CoS?
DR group Revenue
CR group cost of sales
removes sales and purchases
