Consolidation Flashcards
How work out NCI for proportionate? wb fv?
Proportionate:
NCI%*RD NA
FV:
FV NCI at ACQN
NCI% of POST ACQN MOVEMENT
Less NCI% of GW impairment
How to work out GW for proportionate v fv method?
proportionate:
consid
NCI% of NA ACQN
less 100% NA at ACQN
less impairment
fv:
consid
FV of NCI at ACQN
less 100% NA at ACQN
less impairment (full)
How to work out RE using proportionate method? FV?
RETAINED EARNINGS of parent at RD
paarent % of post acqn movement
less goodwill impairment
(100% if proportionate, only parent % of impairment if fair value)
Dealing with PPE purps in previous period v current
if previous dont need to adjust for profit as will have already been done-just depreciaiton charge to spl
If during year need to transfer profit and depreciaiton
intra-group interest/management charges
cancel in cspl schedule
typically in finance costs/opex and interest income/other income
Double entry for GW impairment
Cr Goodwill Dr goodwill impairment expense
now where on the cSPL this goes depends on method
If proportionate put through parent col, if FV put through subsid col
Both usually charged to opex unless told otherwise
fv excess adjustments
on acquisition would have bought the subsid with ppe for fair value however if it is deemed an item FV is in excess of the carrying amount in subsid accounts (ie what compnay acquired/recorded consideration on) thencompany will only be charging depn of the lower amount assumed on acqn not the fair value, therefore to recognise this will need to charge the additional depn
On cSOCIE how are dividends treat
For retianed earnings columndividends will be all paid by parent (as this was external to group sareholders not within the group)
For NCI this will be the subsiduary dividends paid that are external to the group (as the remainder will have been paid internally so should be ignored)
W4 should match bottom of NCI whilst W5 should match RE
How would you work out bf figure for NCI in cSOCIE?
if proportionate method do NCI% of na at beginning of year
if not given can work backward by adding back the full dividend (not just NCI amount) and remvoing income
How to calculate the bf RE figure in cSOCIE?
100% of re at start of year
+parent % of post acqn movment from acquisiton until START of the year
less any previous impairments
What happens to changes in goodwill estimate from fv initially recorded?
If within 12 months and due to conditions previously exxisting then can update goodwill-however, if not this would be a chnage in accounting estimate and thus should be expensed to the PL
Explain why FV adjustments increase PPE and decrease goodwill
Parents acquire subsiduaries at the FAIR value of the net assets assumed at the time of acquisition,
Now say if subsid had some land from a few years ago this will have been recorded at cost in subsid accounts
But bc land will likely have increased this will not be the fair value of net assets at acqn for consolidation and therefore an uplift is required
this leads to a ppe increase
now as goodwill is formally the difference between the value of net assets and consideration paid
this will also in turn impact on the goodwill causing it to decrease in line with the increase in net assets (subsequently making a smaller difference)
Explain why FV adjustments increase PPE and decrease goodwill
Parents acquire subsiduaries at the FAIR value of the net assets assumed at the time of acquisition,
Now say if subsid had some land from a few years ago this will have been recorded at cost in subsid accounts
But bc land will likely have increased this will not be the fair value of net assets at acqn for consolidation and therefore an uplift is required
this leads to a ppe increase
now as goodwill is formally the difference between the value of net assets and consideration paid
this will also in turn impact on the goodwill causing it to decrease in line with the increase in net assets (subsequently making a smaller difference)
where should fv adjustments effect in workings?
at acquisition
w2 re
also
w3 goodwill but will be adjusted by w2
at reporting
cSFP asset balance (w2)
also NCI W4 impacted due to adjustment
also need to add to PPE and reduce by depn
how should you adjust goodwill in S books for another entity?
What about other intangibles that S has not recognised as dont fit criteria?
removed from nca goodwill in s’s books and in
na working on acn and rd sections
as this goodwill is non-identifiable
other non-identifables should be recognised thus added to intangibles and to W2
also need to add exra amortisation
How should contingent liabilities be treat for consol adjustments?
not disclosed in S books but will need recognised in consol therefore will need to recognise a liability for this:
provisions of P+provisions of S+contingent liability
This will also reduce acqn and rd sections in W2
How to present subsid acqn in NCI in cSOCIE using proportionate method? Wb fv?
proportionate is the net assets at acqn*NCI%
if fv it is the fv of NCI at acqn
How to work out parents retained earnings at beginning of the year?
How would you need work out the retained earnings bf figure?
re at year end +dividends -profit for the year (TOTAL for parent at bottom of SPL not attributable to)!!
P’s re at beginning of the year
Ps% of S’s post acqn movement
less impairment on goodwill UP to beginning of the year ie bf-full if proportionate share if FV
Basically standard working but need to do up to bf date so exc anyv movements during the year!!
How to calculate share of profit of associate for SPL?
What about investment in associate in SFP?
P share of A%*associate profit for the year-P% of A current year FV depn-current year impair
Investment in associate:
Cost
P% of A post acqn mvt
Less P% of FV depn
Less impairment losses to date
How do you treat balances with an associate?
Leave them-seen as outside the group
HOWEVER will need to adjust for unrealised profits as some of this belongs to parent
You do this as you would for a subsid but then need to*P% of A
Associate PURPs calc and where they go in SFP? Wb SPL?
P%A*normal PURP calc answer
Both cases you reduce from group retained earnings figure BUT
If P sells to A
Cr investment in associate (reduce)
In SPL you would increase COS of the P
And if A sells to P you reduce group inventory
and in SPL reduce profit from associate
Double entry for cash in transit (consol)
Cr receivable Dr cash
Double entry for goods in transit (consol)
Dr inventory Cr payables current account
Contingent consideration. (2)
dr cost of investment cr provision-if cash
dr cost of investment cr shares to be issued-if shares-note these would be at market value at acquisition date
where do acquisition costs go?
expensed to pl unless share issue costs which are debited to share premium
How to deal with non-coterminous year ends in groups?
Statements not more than 3 months is permissible with due adjustment for significant transactions or other events
How would issued shares for consideration impact on SFP?
Use date at acqn, they would increase share cap and prem by issued amount on face of SFP ie cr share cap cr share prem, dr goodwill (consideration)
How should you deal with an increase in contingent consideration?
Decrease group retained earnings the difference and record the increased amount as contingent consideration amount
note the original should be used in workings!!
How should you deal with an increase in contingent consideration?
Decrease group retained earnings the difference and record the increased amount as contingent consideration amount
note the original should be used in workings!!
