Consolidation Flashcards
When goodwill is impaired and NCI is valued at the proportionate share, how are the accumulated impairment losses adjusted? (SOFP)
Deduct total accumulated impairment loss from goodwill in “Goodwill Working”
Deduct P’s share from Parent’s RE in “Group RE Working”
Memorandum Entry:
Dr. Group RE (P’s share)
Dr. NCI (NCI’s share)
Cr. Goodwill (Total)
With NCI valued at fair value, where is the accumulated impairment loss deducted? (SOFP)
Deduct total impairment loss from goodwill in “Goodwill Working”
Deduct S’s RE (subsidiary’s RE) in “Group RE Working”
How do you adjust inter‑company balances for cash in transit? (SOFP)
Dr. Cash (add to cash)
Cr. Receivables (reduce receivables)
How is an inter‑company “goods in transit” imbalance adjusted? (SOFP)
Dr. Inventory (add to inventory)
Cr. Payables (add to payables)
Then, once balances agree, eliminate by:
Dr. Payable
Cr. Receivable
For a P-to-S inter‑company sale, how is URP adjusted? (SOFP)
Deduct URP from Inventory in the Group SOFP
Deduct URP from P’s RE in “Group RE Working”
For an S-to-P sale, what’s the treatment for URP? (SOFP)
Deduct URP from Inventory in the Group SOFP
Deduct URP from S’s RE in “Group RE Working”
(Note: Adjust further if buyer’s NRV write‐down exceeds URP)
How is a FV increase on an asset (still held in S’s books) adjusted? (SOFP)
Add FV adjustment to S’s net assets in “Goodwill Working”
Add adjustment to the relevant asset’s NBV in Group SOFP
How is a FV increase on an asset already sold/settled by S adjusted? (SOFP)
Add FV adjustment to S’s net assets in “Goodwill Working”
Deduct the same amount from S’s RE in “Group RE Working”
For an increase in a liability’s FV that still exists, what’s the treatment?
Deduct FV adjustment from S’s net assets in “Goodwill Working”
Add FV adjustment to the liability’s NBV in Group SOFP
For an FV increase on a liability that’s been settled, how is it adjusted?
Deduct FV adjustment from S’s net assets in “Goodwill Working”
Add FV adjustment to S’s RE in “Group RE Working”
How is extra accumulated depreciation (from FV adjustments) treated?
Deduct extra depreciation from the relevant PPE in the Group BS
Deduct extra depreciation from S’s RE in “Group RE Working”
Memorandum Entry:
Dr. Group RE; Dr. NCI
Cr. PPE
How is profit on an inter‑company sale of a non‑current asset adjusted?
Deduct profit from the carrying amount of the relevant asset in Group SOFP
Deduct profit from the seller’s RE in “Group RE Working”
For a P-to-S sale, how is excess accumulated depreciation adjusted?
Add excess depreciation to the relevant asset in Group SOFP
Add excess depreciation to P’s RE in “Group RE Working”
For an S-to-P sale, what’s the treatment for excess depreciation?
Add excess depreciation to the relevant asset in Group SOFP
Add excess depreciation to S’s RE in “Group RE Working”
How is the combined URP on inter‑company sale of non‑current asset adjusted?
Deduct URP from the relevant asset in Group SOFP
Deduct URP from the seller’s RE in “Group RE Working”
(Entries are analogous for both P→S and S→P sales, with NCI adjustment when required)
How do you adjust for an intangible asset recognized at acquisition (even if not allowed by IAS 38 in S’s books)?
Add the acquisition‑date fair value to Intangible Assets in Group SOFP
Add the same amount to S’s net assets in “Goodwill Working”
Memorandum Entry:
Dr. Intangible Assets
Cr. Goodwill; Cr. NCI
For accumulated amortization:
Deduct from Intangible Assets in SOFP and from S’s RE in “Group RE Working”
Memorandum Entry:
Dr. Group RE; Dr. NCI
Cr. Intangible Assets
Case 1: If the contingent liability still exists and S hasn’t recognized it, what is the treatment?
Case 2 & 3: If S later recognizes the liability at an amount different from (or equal to) the acquisition‑date fair value?
For Case 1:
Deduct its fair‑value (at acquisition) from S’s net assets in “Goodwill Working”
Add the fair‑value amount to current liabilities in Group SOFP
For Case 2 & 3:
First, record the acquisition‑date fair‑value adjustment (as above)
Then adjust the difference by:
• Adding the lower of the two amounts to S’s RE in “Group RE Working” (if S’s liability is lower)
• Or, if settled/at acquisition fair‑value, add to S’s RE in “Group RE Working”
For a loan note (or debenture) issued as purchase consideration (if unrecorded), what is the adjustment?
Include the cost (no. of notes × issue price) in P’s investment in “Goodwill Working”
Show the same amount as a Non‑current Liability in Group SOFP
For a share exchange (if unrecorded), how is the consideration adjusted?
Include cost (no. of P’s shares issued × market value at acquisition) in “Goodwill Working”
Add the nominal value of shares to P’s Share Capital in Group SOFP
Add any excess to P’s Share Premium
How is deferred cash payment (if unrecorded) adjusted?
Include the present value (discounted at P’s cost of capital) in P’s investment in “Goodwill Working”
Show its present value as a liability in Group SOFP
Deduct the excess of the liability over the investment cost from P’s RE as finance cost in “Group RE Working”
For contingent consideration (if unrecorded), what are the adjustments?
Include the fair value at acquisition in P’s investment in “Goodwill Working”
Show the fair value at the SOFP date as a liability in Group SOFP
Adjust any subsequent changes (increase/decrease) from P’s RE in “Group RE Working”
If P transfers another asset (e.g. property) as consideration (if unrecorded), what is the treatment?
Include the asset’s fair value (at acquisition) in P’s investment in “Goodwill Working”
Derecognize the asset’s carrying amount from the Group SOFP
Add/deduct any gain or loss (fair value minus carrying amount) to/from P’s RE in “Group RE Working”
How do you adjust S’s reserves when the acquisition occurs during the year?
Pre‑acquisition reserves = S’s year‑end reserves less (income for the year × n/12)
Post‑acquisition reserves = S’s reserves less pre‑acquisition reserves (or income for n/12)
If S’s inventory valuation method differs from group policy, how is the adjustment made?
Add or deduct the change in inventory value from Inventory in the Group SOFP
Adjust the corresponding RE in “Group RE Working”
How is a dividend paid out of pre‑acquisition profits (if P already recognized it as income) adjusted?
Deduct the dividend from the Investment in “Goodwill Working”
Also, deduct it from P’s RE in “Group RE Working”
How is a post‑acquisition dividend adjusted?
Adjust based on P’s share (e.g. if S declares Rs. 100 dividend and P owns 80%, then P’s share is 80% of post‑acquisition dividend)
Deduct P’s share from “Other Income” (or appropriate RE account)
How are inter‑company finance lease balances eliminated?
Eliminate the “Lease Liability” and “Lease Receivable”
The difference is closed against the RE of the entity with the higher balance
What is the treatment for inter‑company operating leases?
Eliminate the “ROU Asset” and “Lease Liability”
Adjust any difference in the lessee’s RE
If an inter‑company sale of investment property occurs and the buyer uses the fair‑value model, what is done?
No URP adjustment is required
How is an unrealized loss (URL) on inter‑company sales treated?
Calculate similarly to URP but with inverse signs
If the loss indicates impairment, no URL adjustment is made
How are provisional amounts handled in the first year of acquisition?
Consolidate using the provisional figures
Adjust retrospectively if the figures are revised in the following year
How are acquisition‑related costs capitalized in P’s books adjusted on consolidation?
Add these costs to “Finance Cost” or “Admin Expenses” as appropriate
How is URP on a P-to-S sale reflected in SOCI?
URP is added to COS
For an S-to-P sale, how is closing stock URP treated in SOCI?
Add to COS
Deduct from S’s PAT in “NCI working”
How is extra depreciation for the year (from FV adjustments) shown in SOCI?
Add extra depreciation to “Cost of Sales” or “Admin Expenses”
Deduct the same from S’s PAT in “NCI Working”
How is inter‑company profit on sale of a non‑current asset adjusted in the year of disposal? (SOCI)
For P→S sale: Deduct profit from “Other Income”
For S→P sale: Deduct profit from “Other Income” and from S’s PAT in “NCI Working”
How is excess depreciation on the sale of a depreciable asset adjusted in SOCI?
For P→S sale: Deduct excess depreciation from “Cost of Sales” or “Admin Expenses”
For S→P sale: Add excess depreciation to S’s PAT in “NCI Working
Deduct from COS or Admin Expenses”
How is P’s share in interest or dividend (after proper accrual) adjusted?
Deduct P’s share from “Other Income” (or from Finance Cost if applicable)
How is negative goodwill treated on consolidation?
Recognize as income in the year of acquisition
Add negative goodwill to P’s RE in “Group RE Working”
In SOCI, how is the amortization of an intangible asset (recognized at acquisition) adjusted?
Add the amortization expense to “Admin Expenses”
Deduct the same from S’s PAT in “NCI Working”
How are subsequent changes in S’s contingent liability reflected in SOCI?
If S recognizes a liability at an amount different from acquisition‑date fair value, adjust by:
• Deducting any reversal of expense from “Admin Expenses”
• Adding the reversal to S’s PAT in “NCI Working”
How is the finance cost on deferred consideration and fair‑value change on contingent consideration adjusted in SOCI?
For deferred consideration: Add the finance cost on the change (year-end PV minus beginning PV or discount rate × beginning PV) to Group SOCI Finance Cost
For contingent consideration: Recognize the fair‑value change in “Admin Expenses”
How is a non‑cash asset transfer adjusted in the first year on SOCI?
Recognize the profit or loss on the transfer in Group SOCI
If the asset is depreciable, reverse any depreciation charged post‑acquisition
How are S’s income and expenses time‑apportioned when acquisition occurs mid‑year?
Adjust all post‑acquisition items on a “months since acquisition” basis (n/12)
Treat exceptional, period‑specific items separately
How is an impairment loss on an investment in an associate adjusted?
Deduct the accumulated impairment loss from P’s RE in “Group RE Working”
Deduct the same from the “Investment in A” working
Memorandum Entry:
Dr. Group RE
Cr. Investment in A
What elimination is needed for inter‑company balances/incomes between P and an associate?
No elimination is required (since no consolidation of associate’s income/expenses is done)
How is URP on a P-to-A sale adjusted?
Deduct P’s share of URP from the “Investment in A” working
Also, deduct it from P’s RE in “Group RE Working”
For an A-to-P sale, what is the treatment of URP?
Deduct P’s share of URP from Inventory in the Group SOFP
Deduct it from P’s RE in “Group RE Working”
How is extra depreciation on a fair‑value adjustment for an associate’s depreciable asset treated?
Deduct extra depreciation from A’s RE in “Group RE Working”
Memorandum Entry:
Dr. Group RE
Cr. Investment in A
How is the URP on the sale of a non‑current asset between P and A adjusted?
For P→A sale: Deduct P’s share of URP from the “Investment in A” working and from P’s RE
For A→P sale: Deduct P’s share of URP from the relevant asset in Group SOFP and from P’s RE
How is negative goodwill on an associate investment adjusted?
Add negative goodwill to P’s RE in “Group RE Working”
Add the same amount to the “Investment in A” working
Memorandum Entry:
Dr. Investment in A
Cr. Group RE
How is P’s share in an associate’s dividend (after proper recording) treated?
Deduct P’s share from “Other Income” (since the associate’s profit is separately shown)
How is an associate’s PAT adjusted when acquisition occurs mid‑year?
Time‑apportion the associate’s PAT in “Share of Profit from Associate Working” on an n/12 basis
How is an additional impairment loss for the year on an investment in an associate adjusted in SOCI?
Deduct the impairment loss from the share of profit from the associate in “Share of Profit from Associate Working”
