Module 26 - Consolidation (Acquisition Accounting)

Question 1

Step 1

Answer 1

Add individual financial statements together (pro-rate income and expenses for mid-year acquisition)

Question 2

Step 2

Answer 2

Recognise goodwill (or gain from a bargain purchase and NCI at the date of acquisition

Question 3

Goodwill double entry

Answer 3

DR Goodwill
DR Share capital 
DR Reserves 
CR Investment 
CR SFP - NCI

Question 4

Bargain purchase double entry

Answer 4

DR Share capital 
DR Retained earnings 
CR Investment 
CR SFP - NCI 
CR SPL - gain from a bargain purchase

Question 5

Step 3

Answer 5

Recognise impairment in the goodwill

Question 6

Impairment loss double entry arising in the reporting period

Answer 6

DR SPL - Impairment Loss

CR Goodwill

Question 7

Impairment loss arising before the reporting period double entry

Answer 7

DR Retained earnings

CR Goodwill

Question 8

Step 4

Answer 8

Allocate share of subsidiary’s historical profit/ loss and other gains/ losses to NCI

Question 9

Share of subsidy’s historical profit/ loss double entry

Answer 9

DR retained earnings

CR SFP - NCI

Question 10

Step 5

Answer 10

Allocate share of subsidiary’s current year profit/ loss to NCI

Question 11

Current year profit allocation to subsid double entry

Answer 11

DR SPL - NCI

CR SFP - NCI

Question 12

Final step

Answer 12

Transfer adjustments in the consolidated statement of profit or loss to the consolidated statement of financial position

Question 13

Final step double entry

Answer 13

DR Retained earnings

CR SPL

Question 14

IAS 1 Presentation of SPL

Answer 14

Profit for the year X

Profit attributable to:
Owners of the parent X
Non-controlling interests X