Consolidation

Question 1

What are the steps when calculating consolidation?

Answer 1

1. Calculate net assets of sub.
2. Calculate goodwill
3. Calculate unrealised profit on inventory
4. Calculate NCI
5. Calculate group RE

Question 2

How do you calculate net assets of the sub.

Answer 2

Have two columns net assets at acquisition and net assets at reporting date.

Acquisition
Share Capital
Retained earnings
Fair value adjustment
Total

Reporting date
Share Capital
Retained earnings
Fair value adjustment
LESS: Additional depreciation (FV exceeded amount/ no. of useful years * no. of years used)

Question 3

How do you calculate goodwill? (full goodwill method)

Answer 3

Cost of investment
NCI
Less: net assets of sub. at ACQUISITION
Goodwill at acq.
Less: impairment
Goodwill at reporting date

Question 4

How to calculate unrealised profit on inventory?

Answer 4

Sales = 100% + mark up
Less: COS (work out 100%)
Gross profit (sales-COS)
Unrealised profit (% of remaining inventory * gross profit)

OR

(selling price - carrying amount) * % of NCI

Question 5

How do you calculate NCI? (Full goodwill method)

Answer 5

NCI at acq.
NCI share of post-acq. reserves (golden cell* % of NCI)
Less: NCI share of GW impairment
Less: unrealised profit (selling price - carrying amount * % of NCI)

Question 6

How do you calculate group RE? (full goodwill method)

Answer 6

100% of parent RE
Less: parent % of unrealised profit on inventory
Sub. post acq. profit (golden cell*% of parent)
Less: parent % of GW impairment of sub.
Share of post acq. profit of associate (parent % * associate profit)
Less: impairment loss of associate (parent % (probably 100%) * associate impairment) READ QUESTION, WORDED AS IF THE INVESTMENT IS ALL IMPAIRED SO USE WHOLE AMOUNT

Question 7

How do you calculate goodwill? (proportionate method)

Answer 7

Cost of investment
NCI (net assets at acq. * NCI %)
Less: net assets of sub. at ACQUISITION
Goodwill at acq.
Less: impairment
Goodwill at reporting date

Question 8

How do you calculate NCI? (proportionate method)

Answer 8

NCI at acq. (net assets of sub at acq. * NCI %)
NCI share of post-acq. reserves (golden cell* % of NCI)
Less: unrealised profit (selling price - carrying amount * % of NCI)

DO NOT INCLUDE IMPAIRMENT PROPORTIONATE METHOD

Question 9

How to calculate group RE? (proportionate method)

Answer 9

100% of parent RE
Less: parent % of unrealised profit on inventory
Sub. post acq. profit (golden cell*% of parent)
Less: GW impairment of sub. (IN PROPORTIONATE METHOD ALL IMPAIRMENT IS CHARGED TO RE)
Share of post acq. profit of associate (parent % * associate profit)
Less: impairment loss of associate (parent % * associate impairment) READ QUESTION, WORDED AS IF THE INVESTMENT IS ALL IMPAIRED SO USE WHOLE AMOUNT