Group Accounts Flashcards by Mark Hardy

CSFP W2

Net assets of subsidiary (one working required for each sub)
NA@SFP. NA@acq. movement
SC. x. x. -
Rev Res. x. x. x. -> W6
RE. x. x. x. -> W5
x ->W4. x ->W3.

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CSFP W1

Group Structure

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CSFP W3

Goodwill

Consideration. x
add NCI (NCI% x NA @ acq (W2) x
or FV of NCI @ acq)
less 100% NA of S @ acq(W2). (x)

Goodwill at acq. x
less cumulative impairments to GW. (x)
GW @ year end. x. -> CSFP

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What effect does Goodwill (at acquisition) being positive or negative have?

If positive: GW is an intangible asset - tested every year for impairment

If negative: “Gain in bargain purchase” - treated as an instant profit in CIS and group retained earnings (W5)

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CSFP W4

Non-Controlling Interest (NCI)
either:
Share of net assets method - NCI% x NA of S @ SFP (W2)
or:
Fair Value method:
FV of NCI @ acq
add NCI'% x S's post acq NA(W2)
less NCI% x impairments to goodwill

total NCI @ SFP

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CSFP W5

Group retained earnings

100% P’s RE. x
P’s % of S’s post acq RE (W2). x
less cumulative impairments to GW (W3). (x)
Add gain on bargain purchase (W3). x

Total group retained earnings. x. -> CSFP

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CSFP W6 (and when is it required?)

Group revaluation reserve (only required if there is any post acquisition movement in group rev res)

100% P’s rev res. x
P’s % of S’s post acq rev res (W2). x

Group Revaluation reserve. x. -> CSFP

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CSFP “easy marks”

P’s share capital

Bracketed workings:

100% of P’s and S’s assets and liabilities - leave open for PURP….

inventory (100%P, 100%S - leave open for PURP…

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CSFP group structure

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CSFP Net assets of subsidiary

W2 (required before W3-5 can be completed)

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CSFP Goodwill

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CSFP NCI

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CSFP Group retained earnings

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CSFP - if there has been post acquisition movement in the group’s revaluation reserve….?

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Inventory PURP

Remove intra group trading for. revenue and CoS
and:
Step 1: PURP = Profit element x stock remaining at y/e

Step 2: Dr RE (if P is seller - W5, is S is seller - W2)
             Cr Inventory (bracketed workings)

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NCA PURP

Step 1:
remove unrealised profit from books of seller
plus excess dpn:
CV of NCA at Y/E after transfer. x
CV of NCA at Y/E if transfer hadn’t taken place. (x)

NCA PURP. x

Step 2: Dr Retained earnings (if P is seller - W5, if S is seller - W2)
             Cr PPE (bracketed workings in CSFP)

FV uplift on inventory

Impacts CSFP (brackets) and W2 (@ SFP)

FV uplift on PPE

Impacts CSFP - PPE (100% P + 100%S + FV uplift - FV dpn)

W2: add FV (acq&SFP) uplift less FV dpn (SFP)

FV uplift on intangibles

Impacts CSFP: add FV up less FV amortisation

same for W2 less goodwill on S’s books

(remember goodwill in books of S is not recognisable so must be removed.)

FV uplift on contingent liability

Impact CSFP provisions and W2

Provisional Fair Value

measurement period = 12 months after acquisition date
either:
Confirmation of FV within measurement period - adjust retrospectively - goodwill recalculated with final FV - increase/decrease in assets/liabilities in CSFP
or:
Confirmation outside of measurement period - treated as a change in accounting estimate - adjust prospectively - GW not recalculated - impairment review is performed.

CIS W1

Group structure

CIS W2

Consolidation schedule

                                    P.         S.       Adj.        Total
Revenue.        
CoS
Operating expenses
Finance Cost
Investment income
Tax

Total

Total S (PAT) to W3
Total adj must sum to zero
Total column to CIS

CIS W3

Non-Controlling Interest

NCI% x S’s PAT (W2)

CIS - "the final product"

Revenue (W2) CoS (W2) ``` Gross profit (Sum) Operating expenses (W2) ``` ``` Operating profit (Sum) Finance Cost (W2) Investment Income (W2) ``` ``` PBT (Sum) Tax expense (W2) ``` PAT (Sum) Attributable to P (Balance) Attributable to NCI (W3) Total (=PAT)

CIS mid year acquisitions

If S acquired mid yr then pro rate W1 - include yr owned fraction W2 - include fraction and pro rate column S

CIS intra-group transactions

Purchases and sales must be eliminated via W2 adj. column Dr Revenue Cr Cost of Sales

CIS inventory PURP

Inventory adjustment already included in CSFP Reduce profit by increasing cost of sales in The seller's column

CIS intra group dividends

Payment of div. by S to P needs to be cancelleo Reduce investment income in P's column by P's share of the dividend paid. note: S's investment income can be left

CIS Transfers of Non-Current Assets

PURP composed of: - Profit on disposal - Extra dpn. charged since transfer The whole PURP adjusted through the seller's column of W2 in the expense through which dpn. is charged

CIS Intra-group interest & management charges

Such charges payable in S and receivable in P should be cancelled against each other

CIS goodwill impairments

Once identified during the year: - Passed through W2, usually under operating expenses. Note: if GW calculated using FV method, NCI share of PAT needs to be adjusted for NCI share of impairment.

CSOCE - pro forma

SC. RE. Total. NCI. Total B/F. x. x. x. x. x TCI for the yr. - x. x. x. x Divs paid. - (x) (x) (x) x C/F. x. x. x. x. x TCI for the yr: taken from CSI split (P-RE, S - NCI) SC: Just the parent's OSC Divs paid: RE-just P's div, NCI-div s paid to NCI C/F: NCI - from CSFP W4 - NCI% x S's NA @ SFP

CSOCE - mid yr acquisitions

``` New sub enters group: - needs to be shown in CSOCE in NCI column (share of net assets or FV method) e.g. B/F. x TCI. x Divs. (x) Added in acq. x C/F. x ```

Profit from discontinued operations

Profit from disposal of sub: ``` Proceeds - CV of goodwill @ disposal - Sub Net assets @ disposal Add back attributable to NCI = Profit in Disposal + Sub profit for the year = Profit from discontinued operations ```

related party transaction

IAS 24 related party disclosure requires disclosure of aggregate amount of the transactions between related parties subsequent to appointment + any outstanding balances Arms length not exempt from disclosure but can be noted if evidence to support

Remember fair value adjustments on NCA (tangible/intangible)...

Adjust depreciation / amortisation