Consolidation

Question 1

How work out NCI for proportionate? wb fv?

Answer 1

Proportionate:
NCI%*RD NA

FV:
FV NCI at ACQN
NCI% of POST ACQN MOVEMENT
Less NCI% of GW impairment

Question 2

How to work out GW for proportionate v fv method?

Answer 2

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)

Question 3

How to work out RE using proportionate method? FV?

Answer 3

RETAINED EARNINGS of parent at RD
paarent % of post acqn movement
less goodwill impairment
(100% if proportionate, only parent % of impairment if fair value)

Question 4

Dealing with PPE purps in previous period v current

Answer 4

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

Question 5

intra-group interest/management charges

Answer 5

cancel in cspl schedule
typically in finance costs/opex and interest income/other income

Question 6

Double entry for GW impairment

Answer 6

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

Question 7

fv excess adjustments

Answer 7

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

Question 8

On cSOCIE how are dividends treat

Answer 8

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

Question 9

How would you work out bf figure for NCI in cSOCIE?

Answer 9

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

Question 10

How to calculate the bf RE figure in cSOCIE?

Answer 10

100% of re at start of year
+parent % of post acqn movment from acquisiton until START of the year
less any previous impairments

Question 11

What happens to changes in goodwill estimate from fv initially recorded?

Answer 11

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

Question 12

Explain why FV adjustments increase PPE and decrease goodwill

Answer 12

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)

Question 13

Explain why FV adjustments increase PPE and decrease goodwill

Answer 13

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)

Question 14

where should fv adjustments effect in workings?

Answer 14

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

Question 15

how should you adjust goodwill in S books for another entity?

What about other intangibles that S has not recognised as dont fit criteria?

Answer 15

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

Question 16

How should contingent liabilities be treat for consol adjustments?

Answer 16

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

Question 17

How to present subsid acqn in NCI in cSOCIE using proportionate method? Wb fv?

Answer 17

proportionate is the net assets at acqn*NCI%

if fv it is the fv of NCI at acqn

Question 18

How to work out parents retained earnings at beginning of the year?

How would you need work out the retained earnings bf figure?

Answer 18

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!!

Question 19

How to calculate share of profit of associate for SPL?

What about investment in associate in SFP?

Answer 19

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

Question 20

How do you treat balances with an associate?

Answer 20

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

Question 21

Associate PURPs calc and where they go in SFP? Wb SPL?

Answer 21

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

Question 22

Double entry for cash in transit (consol)

Answer 22

Cr receivable Dr cash

Question 23

Double entry for goods in transit (consol)

Answer 23

Dr inventory Cr payables current account

Question 24

Contingent consideration. (2)

Answer 24

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

Question 25

where do acquisition costs go?

Answer 25

expensed to pl unless share issue costs which are debited to share premium

Question 26

How to deal with non-coterminous year ends in groups?

Answer 26

Statements not more than 3 months is permissible with due adjustment for significant transactions or other events

Question 27

How would issued shares for consideration impact on SFP?

Answer 27

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)

Question 28

How should you deal with an increase in contingent consideration?

Answer 28

Decrease group retained earnings the difference and record the increased amount as contingent consideration amount

note the original should be used in workings!!

Question 29

How should you deal with an increase in contingent consideration?

Answer 29

Decrease group retained earnings the difference and record the increased amount as contingent consideration amount

note the original should be used in workings!!