Subsequent consolidation Flashcards

1
Q

Subsequent Consolidation

A

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.

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2
Q

Per acquisition

A

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”

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3
Q

Depriciation table

A

− 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

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4
Q

Revaluations in subsequent periods

A
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5
Q

Worldwide agreement on Goodwill

A

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).

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6
Q

Different goodwill concepts in subsequent periods

A

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

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

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7
Q

Impairement only

A

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

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8
Q

Capitalization & Amortization

A

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.

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9
Q

Offset against equity with shadow accounting

A

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.

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10
Q

Impairement only treatment

A

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

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11
Q

Capitalization & Amortization treatment

A

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.

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12
Q

Offsetting and shadow accounting treatment

A

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.

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13
Q

Consolidated profit

A
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14
Q

Consolidated equity

A
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15
Q

Return on consolidated equity

A
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16
Q

Impairement test

A
17
Q

Impairement of goodwill 1

A
18
Q

Impairement of goodwill 2

A
19
Q

Impairement of goodwill 3

A
20
Q

Impairement of goodwill 4

A
21
Q

Define group

A

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.

22
Q

What does the consolidated F.statements represent?

A

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.

23
Q

What is group relevant profit?

A

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

24
Q

Treatment of Intragroup profit 1

A
25
Q

Treatment of Intragroup profit 2

A
26
Q

Calculation of unrealized intragroup profit

A
27
Q

Treatment of intragroup profit in statement

A