Reporting Entity

Reporting Entity & Consolidation Principles IFRS 10 & 11ACCA F7 & P2Part 3

2015Mark Fielding-Pritchard1Mark Fielding-Pritchard

1Consolidation Procedurerequired whenever business combination by acquisition of shares results in an investment account on records of acquiring companynever required when business combinations by acquisition of net assets not required when business combination by acquisition of shares and the shares of acquired company liquidated Mark Fielding-Pritchard22015Steps in Consolidation Worksheet Procedure at Date of Acquisition Without Non Controlling Interest- Statement of Financial Position (BS)Draw up a worksheet with 4 columns, P, S, Adjustments & Consolidatedenter the balance sheets of parent and subsidiaryCalculate net assets at the date of acquisitionCalculate goodwillEnter adjustments in the adjustments columnPrepare consolidated balance sheet from worksheetMark Fielding-Pritchard32015enter separate balance sheets of parent and subsidiaryprepare consolidation worksheet adjustmentseliminate subsidiary owners equity recognize revaluation increments and decrements recognize goodwill complete non controlling interest columncomplete consolidated columnprepare consolidated balance sheet from worksheetMark Fielding-Pritchard42015Steps in Consolidation Worksheet Procedure at Date of Acquisition With Non Controlling Interest2015Mark Fielding-Pritchard5P S AdjConsCash$ 63,500 $ 10,000Accounts receivable, net100,00027,500Inventory175,00040,000Investment in S Co.120,000Land200,00035,000Building and equipment, net325,00080,000Patent7,500 Total assets$ 983,500$200,000On January 1, 20X1, P was able to control S. P received 80% of the common stock of S Company.

Liabilities and EquityAccounts payable$ 125,000$ 26,925Bonds payable, net483,50078,075Common stock ($30 par value)150,00050,000Retained surplus225,00045,000 Total liabilities and Equity$ 983,500$200,000Current ValueBook ValueRemaining LifeInventory$42,500$40,0001 yearLand50,00035,000IndefiniteEquipment45,00020,00010 yearsPatent-0-7,5003 years

The non controlling interest is valued at the date of acquisition as $23.5mInformation on S Company as of January 1, 20X1 follows:

Consolidation Format- GoodwillPaid $120m + NCIs $23.5m = $143.5mReceivedShares 50Retained earnings = 45Fair value adjustments = $35

Goodwill = 13.5 on acquisition2015Mark Fielding-Pritchard8Goodwill Calculation

P Paid

120000

Cr Investment 120000Shares(50000)Dr Share Capital SRetained Surplus(45000)Dr Retained Surplus SFair Value Adjustments(35000)Dr/Cr Individual AssetsDr Inventory 2500Dr Land 15000Dr Equipment 25000Cr Patent 7500Missing number Goodwill13500Dr Goodwill 13500Non Controlling interest Cr NCI 23.52015Mark Fielding-Pritchard9Comparison of what we paid & what we received in S

2015Mark Fielding-Pritchard10P S Dr.AssetsCash 63,500 10,000 73500Accounts receivable 100,000 27,500 127500Inventory 175,000 40,000 2,500 217500Investment in S Co. 120,000 (120,000) Land 200,000 35,000 15,000 250000Building & equip., net 325,000 80,000 25,000 430000Patent 7,500 (7500)0Goodwill 13,500 13,500Total assets 983,500 200,000 1112000Liabilities and EquityAccounts payable$ 125,000$ 26,925151925Bonds payable, net483,50078,075561575Common stock ($30 par value)150,00050,000(50000)150000Retained surplus225,00045,000(45000)225000NCI23500 Total liabilities and Equity$ 983,500$200,0001112000To ConcludeEquity of S disappears as do pre acq profits of SInter co sales are eliminated, Dr Revenue, Cr C of SIf P has sold goods to S (or vice versa) inventory will include profit on sale, eliminateIf assets are transferred then eliminate any gains to reduce the transfer to NBV2015Mark Fielding-Pritchard12