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FAR CONSOLIDATION > CSFP > Flashcards

CSFP Flashcards

1
Q

CSFP: Basic Steps

A
  1. P & S Assets and Liabilities
    Ignoring inv in S
  2. P only SC and SP
  3. Goodwill
  4. NCI
  5. RE
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2
Q

General concept: How much of the Sub’s retained earnings is owned by the parent?

A

Movement in Sub’s retained earnings

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3
Q

The basic workings

A

W1 - Group Structure
W2 - S NAs
W3 - Goodwill
W4 - NCI
W5 - RE

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4
Q

NCI: Important thing to remember

A

TWO methods of calculating:

  1. Proportionate
  2. Fair Value
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5
Q

NCI: Where to put the line item?

A

Directly under Retained Earnings

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6
Q

NCI: Basic concept

A

NCI owns some of S, so reduce equity.

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7
Q

NCI method: Fair Value

A

NCI% # S shares in issue
X
S share price (I.e. FV)

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8
Q

NCI method: Proportionate

A

NCI% S EQUITY

(Because NA = Equity)

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9
Q

W3: Goodwill: Calculation

A

FV of consideration

+ NCI @ Acq (FV/Prop)

less: FV S NA @ Acq)

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10
Q

W2: S NA Pro Forma

A

(Looks at equity because equity = NA)

         REP    ACQ   POST ACQ MOV SC SP RE

TOTALS

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11
Q

W2: S NA: Where to find the Reporting Date column figures?

A

The accounts provided (S SFP)

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12
Q

W2: S NA: Where to find Acquisition column figures?

A
  1. SC & SP: SAME AS @ REPORTING
  2. RE: Provided in question
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13
Q

W2: S NA: Where to find Post Acq column figures?

A

Only need TOTAL figure

= difference of Rep & Acq totals

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14
Q

W2: S NA: Which figures go where??

A
  1. Total Acq NAs ->
    a. W3 GW: 3. FV of S NA @ Acq
  2. Post Acq Mov Total ->
    a. W4 NCI: 2. (NCI%) Post-Acq RE
    b. W5 RE: 2. (P%) Post-Acq RE
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15
Q

W3: GW: Which figures go where??

A
  1. **NCI @ Acq ** ->
    a. W4 NCI: 1. NCI @ Acq
  2. Goodwill -> CSFP
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16
Q

W3: GW: Where to find: 1. FV of Cons?

A
  1. Could be in question

Or require workings:

  1. Share-for-share exchange
  2. Deferred cash consideration
  3. Contingent consideration
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17
Q

W3: GW: Working out FV of consideration: Share-for-share exchange: What is it?

A

Parent gives their shares in exchange for the Sub’s shares (I.e. control)

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18
Q

W3: GW: Working out FV of consideration: Share-for-share exchange: Steps

A

Steps:

  1. # S shares acquired (based on P%)
  2. # P shares (issued)
  3. Value P shares (issued)
    (@ Ps share price)

Where they go:

  1. Value P shares issued -> Consideration
  2. (P) Share Capital (at FV) -> CSFP
  3. (P) Share Premium (β) -> CSFP
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19
Q

W3: GW: Working out FV of consideration: Deferred Cash Consideration: Steps

A
  1. Record at Acq AT PV

2. UNWIND
(To PV year on year)

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20
Q

W3: GW:
Working out FV of consideration:
Deferred Cash Consideration:
Step 1: Record at Acq at PV

A
  1. Consideration -> Deferred cash: PV of £ to be received
    (Plus shares given)
  2. Deferred cash -> CSFP Liability
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21
Q

W3: GW:
Working out FV of consideration:
Deferred Cash Consideration:
Step 2: Unwinding deferred consideration

A
  1. Increase (DR) Finance Cost
    NOT Investment
  2. Increase (CR) Deferred consideration liability

DOESN’T effect FV of consideration

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22
Q

W3: GW:
Working out FV of consideration:
Contingent Consideration

A
  1. Record cons at FV
    ( x probability of payment)
  2. CR contingent liability (CSFP)
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23
Q

W3: GW:
Working out FV of consideration:
Contingent Consideration:
What to do with movements?

A

Put in profit/loss NOT consideration

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24
Q

W2: GW: Where to find: 2. NCI @ Acq

A

FV or proportionate method

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25
Q

W3: GW: Where to find: 3. FV of S NA @ Acq?

A

W2: Total Column S NA @ Acq

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26
Q

W4: NCI: Unique thing about it

A

Both figures are from other workings

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27
Q

W4: NCI: Where to find the figures??

A
  1. NCI @ Acq <- W3 2. NCI @ Acq
  2. NCI% S PA RE <- NCI% W2 Total column PA Mov
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28
Q

W5: RE: Where to find figures??

A
  1. 100% P RE <- SFP
  2. P% S RE <- P% W2 Total
    Column PA Mov
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29
Q

The interesting thing about W4: NCI and W5: RE?

A

Both take the same figure from W2

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30
Q

W4: NCI: Where to put the figures??

A

NCI (total) -> NCI line in CSFP

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31
Q

W5: RE: Where to put the figures??

A

RE: Total -> RE line in CSFP

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32
Q

CSFP: Adjustments: Intra-company balances

A

Remove ALL intra-company balances

Payables & Receivables

33
Q

CSFP: Adjustments: Cash in transit

A
  1. Treat cash as received

**2. Remove intra-company receivables and payables **
(The rest of the outstanding balances)

34
Q

CAFP: Adjustments: Unrealised Profits

A

For the PROFIT ELEMENT:

  1. Remove the inventory diff (SFP)
  2. Lower RE of seller (W2/W5)
35
Q

CSFP: Adjustments: (Inventory in transit)

A

(Similar to cash in transit)

  1. Add group inventory
  2. Reduce group payables
  3. Remove any PURP on inventory
36
Q

CSFP: Non-Current Asset PURP

A

(Basically the same but with PPE)

  1. Reduce PPE (By the profit)
  2. Reduce RE of seller (W2/W5)
37
Q

CSFP: Adjustments: Fair Value Adjustments: Based on what general principle?

A

Identifiable assets should be brought into the group statements at fair value

PPE, Inventories, Contingent Liabilities

38
Q

CSFP: Adjustments: Fair Value Adjustments: Process

A

Adjust S NA (W2) at both dates

39
Q

CSFP: Adjustments: Fair Value Adjustments: Process: If PPE

A
  1. DEPRECIATE the change
    a. @ Reporting
    b. Extra line on W2
    c. Cumulative from ACQ
    d. Pro rate
40
Q

CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: Where do you recognise?

A

Extra line on W2

41
Q

CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: How much depreciation

A

Cumulative - ALL since acquisition

42
Q

CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: What if PPE acquired during the year?

A

PRO-RATE

43
Q

CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process

A
  1. Reduce S’s NA (W2)
    a. @ both dates
    b. Whole liability amounts
    c. Xtra line
  2. Show Contingent Liability on CSFP
    c. Xtra line
44
Q

CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Reducing S Na by how much?

A

Whole (contingent) liability amount

45
Q

CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Where do you reduce the NA amount? Which line?

A

A new line

46
Q

CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Which line do you show the contingent liability on the CSFP?

A

New line

47
Q

CSFP: Adjustments: Mid-Year Acquisitions

A

Pro rate assuming even profits (REs) throughout the year

48
Q

CSPL: Main difference

A

Additional section underneath
(To show ownership):

  1. P Profit (β)
  2. NCI% of S profit (S profit only)
49
Q

CSPL: Acquisition during year

A

Pro-Rate all S results from Acq date

EXCEPT revaluation gain

50
Q

CSPL: Pro Forma

A

Revenue
COS
-Inv PURP
-FV adj xtra dep’n
Gross Profit
Distribution
Admin
-GW Impairment
Finance Cost
Interest Income
-Div from S
Associate Impairment
PBT
Tax
PFY
Reval Gain
Associate
TCI

Parent
NCI

51
Q

CSPL: Pro Forma: Which (existing) lines can have adjustments??

A
  1. COS
  2. Admin
  3. Investment Income
52
Q

CSPL: Pro Forma: Potential adjustments in: COS

A
  1. Minus Inventory PURP
  2. Minus FV Adj Extra Dep’n
53
Q

CSPL: Pro Forma: Potential adjustments in: Admin

A

GOODWILL IMPAIRMENT

54
Q

CSPL: Pro Forma: Potential adjustments in: Investment Income

A

DIVIDEND from S

55
Q

CSPL: Pro Forma: The extra lines

A
  1. Associate - Impairment
  2. Associate
  3. TCI: Parent & NCI
56
Q

CSPL: Pro Forma: Columns

A
  1. Parent
  2. Sub
  3. Adjustments (Intra group trading)
  4. GROUP
57
Q

CSPL: Pro Forma: Adj Column: 2 adjustments

A

(For intra-group transactions)

  1. Intra-Group Sales:
    a. Revenue
    b. COS
  2. Intra-Group interest:
    a. Investment Income
    b. Finance Costs
58
Q

SCPL: Adjustments: Intra-group trading

A

E.g. sales, loans, debenture interest, management charges

Remove the expense and income

DOESNT MATTER IF REALISED OR NOT

59
Q

SCPL: Adjustments: Intra-group trading: Realised

A

STILL ADJUST

(Doesn’t later if released or not)

60
Q

SCPL: Adjustments: Unrealised profits: Relates to what?

A

GOODS unsold at year end

61
Q

CSPL: Adjustments: Unrealised profits: Steps

A
  1. Increase SELLER COS
    (More cost - less profit)

ONE STEP :)

62
Q

CSPL: Adjustments: Group Disposals: Process

A
  1. Calculate GROUP PROFIT/LOSS ON DISPOSAL
    • Separate line item

2. Consolidate revenue and costs up to disposal

63
Q

SCPL: Adjustments: Group Disposals: Group Profit/Loss on disposal working

A
  1. Proceeds
  2. Add: *NCI**
    (100% value)
  3. Less: NA @ Disp
  4. Less: Goodwill
    (control)

= GROUP PROFIT ON DISPOSAL

64
Q

SCPL: Adjustments: Group Disposals: Process: Where is group profit/loss on disposal disclosed?

A

Separate line item

65
Q

Associates: Ownership percentage

A

20% - 50%

66
Q

Associates: Where is it disclosed?

A

ONLY ONE LINE ITEM
In the CSPL & CSFP

67
Q

Associates: CSFP: Process: General principle

A

‘Investment in Associate’ (NCA)
Adding what P has influence over
To their initial investment

I.e. add P% of A post acq REs

68
Q

Associates: CSFP: Process: Steps

A
  1. Cost of investment in A
  2. P% A PA RE
    (Less: 3. GW Imp)

(Less div received from A)

= INVESTMENT IN ASSOCIATE

69
Q

Associates: CSFP: Process: What else to remember

A
  1. P% A PA RE -> WORKING 5: RE

And GW imp goes to W5

70
Q

Associates: CSPL: General process

A

Add line directly before PBT:

‘Share of profits of associate’

71
Q

Associates: CSPL: Process steps

A
  1. P% A profit
  2. less: GW Imp for the year

(less dividend income from A)

= SHARE OF PROFIT OF ASSOCIATE

72
Q

Associates: CSPL: Thing to watch out for

A

Remove dividend income from A

(Because would be double-counting as div would be taken from profits already counted)

73
Q

Associates: The one adjustment:

A

PURPS

74
Q

Associates: PURPS: Big difference

A

Adjust for P% only

75
Q

Associates: PURPS: Process: P sells to A: CSFP

A
  1. Remove from group RE (SFP)
  2. Remove from Investment in Associate
76
Q

Associates: PURPS: Process: P sells to A: CSPL

A
  1. Increase COS
  2. Reduce Investment Income
77
Q

Associates: PURPS: Process: A sells to P: CSFP

A
  1. Reduce group RE
  2. Reduce group inventory
78
Q

Associates: PURPS: Process: A sells to P: CSPL

A
  1. Reduce (DR?) Share of A profit
  2. Reduce (CR) group inventory

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