CSFP Flashcards
CSFP: Basic Steps
- P & S Assets and Liabilities
Ignoring inv in S - P only SC and SP
- Goodwill
- NCI
- RE
General concept: How much of the Sub’s retained earnings is owned by the parent?
Movement in Sub’s retained earnings
The basic workings
W1 - Group Structure
W2 - S NAs
W3 - Goodwill
W4 - NCI
W5 - RE
NCI: Important thing to remember
TWO methods of calculating:
- Proportionate
- Fair Value
NCI: Where to put the line item?
Directly under Retained Earnings
NCI: Basic concept
NCI owns some of S, so reduce equity.
NCI method: Fair Value
NCI% # S shares in issue
X
S share price (I.e. FV)
NCI method: Proportionate
NCI% S EQUITY
(Because NA = Equity)
W3: Goodwill: Calculation
FV of consideration
+ NCI @ Acq (FV/Prop)
less: FV S NA @ Acq)
W2: S NA Pro Forma
(Looks at equity because equity = NA)
REP ACQ POST ACQ MOV SC SP RE
TOTALS
W2: S NA: Where to find the Reporting Date column figures?
The accounts provided (S SFP)
W2: S NA: Where to find Acquisition column figures?
- SC & SP: SAME AS @ REPORTING
- RE: Provided in question
W2: S NA: Where to find Post Acq column figures?
Only need TOTAL figure
= difference of Rep & Acq totals
W2: S NA: Which figures go where??
-
Total Acq NAs ->
a. W3 GW: 3. FV of S NA @ Acq -
Post Acq Mov Total ->
a. W4 NCI: 2. (NCI%) Post-Acq RE
b. W5 RE: 2. (P%) Post-Acq RE
W3: GW: Which figures go where??
- **NCI @ Acq ** ->
a. W4 NCI: 1. NCI @ Acq - Goodwill -> CSFP
W3: GW: Where to find: 1. FV of Cons?
- Could be in question
Or require workings:
- Share-for-share exchange
- Deferred cash consideration
- Contingent consideration
W3: GW: Working out FV of consideration: Share-for-share exchange: What is it?
Parent gives their shares in exchange for the Sub’s shares (I.e. control)
W3: GW: Working out FV of consideration: Share-for-share exchange: Steps
Steps:
- # S shares acquired (based on P%)
- # P shares (issued)
- Value P shares (issued)
(@ Ps share price)
Where they go:
- Value P shares issued -> Consideration
- (P) Share Capital (at FV) -> CSFP
- (P) Share Premium (β) -> CSFP
W3: GW: Working out FV of consideration: Deferred Cash Consideration: Steps
- Record at Acq AT PV
2. UNWIND
(To PV year on year)
W3: GW:
Working out FV of consideration:
Deferred Cash Consideration:
Step 1: Record at Acq at PV
- Consideration -> Deferred cash: PV of £ to be received
(Plus shares given) - Deferred cash -> CSFP Liability
W3: GW:
Working out FV of consideration:
Deferred Cash Consideration:
Step 2: Unwinding deferred consideration
- Increase (DR) Finance Cost
NOT Investment - Increase (CR) Deferred consideration liability
DOESN’T effect FV of consideration
W3: GW:
Working out FV of consideration:
Contingent Consideration
- Record cons at FV
( x probability of payment) - CR contingent liability (CSFP)
W3: GW:
Working out FV of consideration:
Contingent Consideration:
What to do with movements?
Put in profit/loss NOT consideration
W2: GW: Where to find: 2. NCI @ Acq
FV or proportionate method
W3: GW: Where to find: 3. FV of S NA @ Acq?
W2: Total Column S NA @ Acq
W4: NCI: Unique thing about it
Both figures are from other workings
W4: NCI: Where to find the figures??
- NCI @ Acq <- W3 2. NCI @ Acq
- NCI% S PA RE <- NCI% W2 Total column PA Mov
W5: RE: Where to find figures??
- 100% P RE <- SFP
- P% S RE <- P% W2 Total
Column PA Mov
The interesting thing about W4: NCI and W5: RE?
Both take the same figure from W2
W4: NCI: Where to put the figures??
NCI (total) -> NCI line in CSFP
W5: RE: Where to put the figures??
RE: Total -> RE line in CSFP
CSFP: Adjustments: Intra-company balances
Remove ALL intra-company balances
Payables & Receivables
CSFP: Adjustments: Cash in transit
- Treat cash as received
**2. Remove intra-company receivables and payables **
(The rest of the outstanding balances)
CAFP: Adjustments: Unrealised Profits
For the PROFIT ELEMENT:
- Remove the inventory diff (SFP)
- Lower RE of seller (W2/W5)
CSFP: Adjustments: (Inventory in transit)
(Similar to cash in transit)
- Add group inventory
- Reduce group payables
- Remove any PURP on inventory
CSFP: Non-Current Asset PURP
(Basically the same but with PPE)
- Reduce PPE (By the profit)
- Reduce RE of seller (W2/W5)
CSFP: Adjustments: Fair Value Adjustments: Based on what general principle?
Identifiable assets should be brought into the group statements at fair value
PPE, Inventories, Contingent Liabilities
CSFP: Adjustments: Fair Value Adjustments: Process
Adjust S NA (W2) at both dates
CSFP: Adjustments: Fair Value Adjustments: Process: If PPE
-
DEPRECIATE the change
a. @ Reporting
b. Extra line on W2
c. Cumulative from ACQ
d. Pro rate
CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: Where do you recognise?
Extra line on W2
CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: How much depreciation
Cumulative - ALL since acquisition
CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: What if PPE acquired during the year?
PRO-RATE
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process
- Reduce S’s NA (W2)
a. @ both dates
b. Whole liability amounts
c. Xtra line - Show Contingent Liability on CSFP
c. Xtra line
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Reducing S Na by how much?
Whole (contingent) liability amount
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Where do you reduce the NA amount? Which line?
A new line
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Which line do you show the contingent liability on the CSFP?
New line
CSFP: Adjustments: Mid-Year Acquisitions
Pro rate assuming even profits (REs) throughout the year
CSPL: Main difference
Additional section underneath
(To show ownership):
- P Profit (β)
- NCI% of S profit (S profit only)
CSPL: Acquisition during year
Pro-Rate all S results from Acq date
EXCEPT revaluation gain
CSPL: Pro Forma
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
CSPL: Pro Forma: Which (existing) lines can have adjustments??
- COS
- Admin
- Investment Income
CSPL: Pro Forma: Potential adjustments in: COS
- Minus Inventory PURP
- Minus FV Adj Extra Dep’n
CSPL: Pro Forma: Potential adjustments in: Admin
GOODWILL IMPAIRMENT
CSPL: Pro Forma: Potential adjustments in: Investment Income
DIVIDEND from S
CSPL: Pro Forma: The extra lines
- Associate - Impairment
- Associate
- TCI: Parent & NCI
CSPL: Pro Forma: Columns
- Parent
- Sub
- Adjustments (Intra group trading)
- GROUP
CSPL: Pro Forma: Adj Column: 2 adjustments
(For intra-group transactions)
- Intra-Group Sales:
a. Revenue
b. COS - Intra-Group interest:
a. Investment Income
b. Finance Costs
SCPL: Adjustments: Intra-group trading
E.g. sales, loans, debenture interest, management charges
Remove the expense and income
DOESNT MATTER IF REALISED OR NOT
SCPL: Adjustments: Intra-group trading: Realised
STILL ADJUST
(Doesn’t later if released or not)
SCPL: Adjustments: Unrealised profits: Relates to what?
GOODS unsold at year end
CSPL: Adjustments: Unrealised profits: Steps
- Increase SELLER COS
(More cost - less profit)
ONE STEP :)
CSPL: Adjustments: Group Disposals: Process
- Calculate GROUP PROFIT/LOSS ON DISPOSAL
- Separate line item
2. Consolidate revenue and costs up to disposal
SCPL: Adjustments: Group Disposals: Group Profit/Loss on disposal working
- Proceeds
- Add: *NCI**
(100% value) - Less: NA @ Disp
- Less: Goodwill
(control)
= GROUP PROFIT ON DISPOSAL
SCPL: Adjustments: Group Disposals: Process: Where is group profit/loss on disposal disclosed?
Separate line item
Associates: Ownership percentage
20% - 50%
Associates: Where is it disclosed?
ONLY ONE LINE ITEM
In the CSPL & CSFP
Associates: CSFP: Process: General principle
‘Investment in Associate’ (NCA)
Adding what P has influence over
To their initial investment
I.e. add P% of A post acq REs
Associates: CSFP: Process: Steps
- Cost of investment in A
- P% A PA RE
(Less: 3. GW Imp)
(Less div received from A)
= INVESTMENT IN ASSOCIATE
Associates: CSFP: Process: What else to remember
- P% A PA RE -> WORKING 5: RE
And GW imp goes to W5
Associates: CSPL: General process
Add line directly before PBT:
‘Share of profits of associate’
Associates: CSPL: Process steps
- P% A profit
- less: GW Imp for the year
(less dividend income from A)
= SHARE OF PROFIT OF ASSOCIATE
Associates: CSPL: Thing to watch out for
Remove dividend income from A
(Because would be double-counting as div would be taken from profits already counted)
Associates: The one adjustment:
PURPS
Associates: PURPS: Big difference
Adjust for P% only
Associates: PURPS: Process: P sells to A: CSFP
- Remove from group RE (SFP)
- Remove from Investment in Associate
Associates: PURPS: Process: P sells to A: CSPL
- Increase COS
- Reduce Investment Income
Associates: PURPS: Process: A sells to P: CSFP
- Reduce group RE
- Reduce group inventory
Associates: PURPS: Process: A sells to P: CSPL
- Reduce (DR?) Share of A profit
- Reduce (CR) group inventory