Subsequent consolidation

Question 1

Subsequent Consolidation

Answer 1

In all subsequent consolidations, the revaluation of the assets and liabilities and the calculation of goodwill are done in the same way and using the same values as in the initial consolidation.

Question 2

Per acquisition

Answer 2

in the subsequent periods the revaluation and presentation of goodwill as well as the equity per acquisition are always to be carried out with the focus on “per acquisition”

Question 3

Depriciation table

Answer 3

− Book value of PPE per acquisition according to statutory accounts: 500
− Remaining useful life 5 years; straight-line depreciation, depreciation per year 100
− Increase value of property, plant & equipment: 300

Question 4

Revaluations in subsequent periods

Answer 4

Question 5

Worldwide agreement on Goodwill

Answer 5

There is worldwide agreement to the extent that goodwill resulting from an acquisition is to be ascertained at the time of the initial consolidation (purchase method).

Question 6

Different goodwill concepts in subsequent periods

Answer 6

different concepts exist with regard to the treatment of goodwill in subsequent periods.

− Impairment-only approach
− Capitalization and amortization
− Offsetting and shadow accounting

Question 7

Impairement only

Answer 7

Accepted buy: IFRS, US GAAP

Effect: Recognition of goodwill as an asset, no systematic amortization, disclousure of possible impairement.

Appraisal: Aggreesive approach, M&A firendly as there is no impact from future depriciations, difficult verification of goodwill valuation

Question 8

Capitalization & Amortization

Answer 8

Accepted by: Swiss GAAP FER

Effect: Recognition of Goodwill as an asset, Usually straight-line amortisation, impairment if book value of goodwill is not justifiable anymore

Appraisal: Prudent approach, Difficult estimation of the useful life of goodwill.

Question 9

Offset against equity with shadow accounting

Answer 9

Accepted by: Swiss GAAP FER

Effect: Goodwill is offset against equity immediately. Recognition and Amortization of goodwill to be disclosed in the notes (incl. impairement if book value of goodwill is not justifiable anymore)

Appraisal: Prudent approach. Possible in case of difficult estimation of the useful life of goodwill.

Question 10

Impairement only treatment

Answer 10

Approach:
Consolidated equity per initial consolidation. Consists of parent’s equity

Consolidated profit: no negative imoact on profit due to amortization of goodwill

Return on consolidated equity: Attractive values, risk of high impairement expenses in the future

Question 11

Capitalization & Amortization treatment

Answer 11

Consolidated equity per initial consolidation: Consists of parent’s equity

Consolidated profit: Negative impact on profit due to amortization of goodwill

Return on consolidated equity: Conservative values, reduced risk of impairement exenses in the future.

Question 12

Offsetting and shadow accounting treatment

Answer 12

Consolidated equity per initial consolidation: Consists of parent’s equity decreased by goodwill

Consolidated profit: No negative impact on profit due to amortization of goodwill

Return on consolidated equity: High values, shadow accounting with recognition and amortization shows reference values.

Question 13

Consolidated profit

Answer 13

Question 14

Consolidated equity

Answer 14

Question 15

Return on consolidated equity

Answer 15

Question 16

Impairement test

Answer 16

Question 17

Impairement of goodwill 1

Answer 17

Question 18

Impairement of goodwill 2

Answer 18

Question 19

Impairement of goodwill 3

Answer 19

Question 20

Impairement of goodwill 4

Answer 20

Question 21

Define group

Answer 21

combination of legally independent entities for business purposes, in which a parent controls one or more subsidiaries and may be involved in jointly operated or associated entities.

Question 22

What does the consolidated F.statements represent?

Answer 22

consolidated financial statement pretends to represent the group entities as if they were one single entity. Only the relations to third parties are relevant. All relations between entities within the group must be eliminated.

Question 23

What is group relevant profit?

Answer 23

Group-relevant profit results only when supplies and services are provided towards third parties
− All intragroup supplies and services must be recognized at their respective acquisition or production costs at most
− Unrealized profit that has already been recognized must be corrected. − Corrections:
− Unrealized profit that existed at the beginning of the period must be eliminated directly via equity
− The change in unrealized profit during the current period is recognized in net income

Question 24

Treatment of Intragroup profit 1

Answer 24

Question 25

Treatment of Intragroup profit 2

Answer 25

Question 26

Calculation of unrealized intragroup profit

Answer 26

Question 27

Treatment of intragroup profit in statement

Answer 27