F2 - 2. More Group Accounts

Question 1

What is the name for amounts owed between parents and subsidiaries?

Answer 1

Intragroup balances

Question 2

What do we do with intragroup balances when combining the consolidated statement of financial position?

Answer 2

Eliminate them

Question 3

Why do we eliminate intragroup balances?

Answer 3

Because the consolidates SoFP shows the group as a single economic entity, which cannot trade with itself

Question 4

What are the 4 categories of intragroup balance?

Answer 4

1. Cash in transit
2. Goods in transit
3. Receivables/payables
4. Loans

Question 5

How do we eliminate intragroup balances?

Answer 5

Follow them through to their final position (e.g. Dr payables and Cr receivables)

Question 6

What value of inventories is used in the consolidated statement of financial position?

Answer 6

The lower of cost and NRV to the group

Question 7

What happens when one group member sells inventories at a profit to another member?

Answer 7

The inventories will be overstated by the ‘unrealised profit’ amount

Question 8

What is the name for the adjustment to remove the overstatement of inventories when one group member has sold at profit to another?

Answer 8

PUP - provision for unrealised profit

Question 9

What is the transaction for the PUP when the parent has sold to the subsidiary at profit?

Answer 9

Dr Retained Earnings of P

Cr Consolidated Inventories

Question 10

What is the transaction for the PUP when the subsidiary has sold to the parent at profit?

Answer 10

Dr Retained Earnings of S

Cr Consolidated Inventories

Question 11

What is the equation for the PUP amount?

Answer 11

Profit on intercompany sale x % of goods still in inventories at year end

Question 12

What is the difference between the amount of goodwill shown on the consolidated statement of financial position for the proportionate and the fair value methods?

Answer 12

Only group share vs total goodwill