Group Accounts - Subsidiaries - F2 Flashcards
According to IFRS 10 when does an investor control and investee?
If and only if the investor has all of the following elements:
Power over the investee
Exposure or rights to variable returns from its involvement with the investee
Ability to use its power over the investee to affect the amount of the investors returns
What is power defined as?
Existing rights that give the current ability to direct the relevant activities
What are the general rules with acquisition accounting?
Assets, liabilities, income and expenses are combined in full
Goodwill is recognised in accordance with IFRS 3 Business Combinations
Share capital of group is share capital of parent only
Intra-group balances and transactions are eliminated
Uniform accounting policies must be used
NCI presented within equity, seperately from the equity of the owners of the parent.
Profit and total comprehensive income are attributed to the owners of the parent and to the non-controlling interests
What is goodwill?
Residual amount calculated by comparing the value of subsidiary as a whole and the fair value of its identifiable net assets at the time
Residual amount may exist as a result of:
Positive Reputation
Loyal Customer Base
Staff Expertise
What is goodwill capitalised as?
An intangible asset of the Consolidated Statement of Financial Position
When does negative goodwill arise and how do we account for it?
Consideration paid is less than fair value of identifiable net assets
Not shown within CSFP
Viewed as a gain and credited to profit and so to the group retained earnings
What is fair value defined as in IFRS 13 fair value measurement?
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
What are the different types of consideration that may be included on acquisition?
Cash - FV = amount paid
Shares issure by parent - FV = market price of shares at acquisition date
Deferred cash consideration - FV = present value of amounts paid
Contingent consideration - FV = probability weighted present value
What should never be recognised as part of consideration paid?
Directly attributable cost of acquisition
Provisions for future lsoses relating to the acquired subsidiary
Should intangible assets be recognised on acquisition?
Intangibles now identifiable and should be included in FS at their fair value
How should contingent liabilities be recognised on acquisition?
Recognise as a liability if its fair value can be measured reliably.
In group accounts it will be recognised at fair value even if its not probable
How do we record depreciation arising from fair value adjustments in the CSFP?
Adjust net assets working in reporting date column to reflect cumulative impact upon depreciated caused by adjustment
Reflect the adjustment on the face of CSFP by reducing the carrying amount of the fair valued asset
The extra depreciation will reduce the post-acquisition profits of the subsidiary included in consolidated reserves and NCI calculations
