Cheesecake Factory Durham, As at 31 December 20X2, extracts from their individual statements of financial position showed: As a result of trading during the year, Pink Co’s receivables balance included an amount due from Scarlett of $4,600. The second step here is to identify the provision for unrealised profit (PUP). AR-C section 70, Preparation of Financial Statements, is applicable when a public accountant is engaged to prepare financial statements or prospective financial information. It is important to understand how each calculation fits into the consolidated financial statements, and this will also benefit your future studies when you revisit consolidation in your later Paper Fr and Paper SBR studies. IAS 27 defines consolidated financial statements as ‘the financial statements of a group presented as those of a single economic entity.’ Consolidated financial statements revision. 1 Hour 15 Minutes Timer, This is done by replacing the cost of investment recorded in the parent’s individual records and, instead, adding in 100%, line by line, of the subsidiary’s assets, liabilities, income and expenses to show control. Consolidation means the joint reporting of a group of two or more companies’ financial statements. Financial Consolidation and Reporting Applications: Adding Value to Enterprise Resource Planning Applications ARB 51 states the following: “The purpose of consolidated statements is to present, primarily for the benefit of the shareholders and creditors of the parent company, the results of operations, and the IAS 28 also states that a holding of 20% or more of the ordinary (voting) shares can be presumed to give the investor significant influence unless it can be demonstrated otherwise. This is consistent with the treatment of other assets and the concept of control. Financial … The following illustration demonstrates this in the context of the consolidated statement of profit or loss. Power may be evidenced by all or some of the following: A typical OT may describe a number of different investments and you would need to decide if they are subsidiaries – ie if control exists. You should use the range 20-50% of voting shares in the exam as your main indicator of significant influence. Illustration 2 is an example of a typical question. Pink Co acquired 80% of Scarlett’s Co ordinary share capital on 1 January 20X2. In this question the fair value of the non-controlling interest is given, so in our calculation we just need to add it to the consideration transferred. Answer In a MTQ it is likely you would be given the value of a NCI share and have to apply it to the 8,000 shares that Red did not acquire. Stand-alone financial statements are different than consolidated financial statements. You can then proceed to eliminate some of the entries in the unit-specific financial statements that cannot be included in consolidated financial reports. Has there been any intra-group trading during the year, irrespective of whether the goods are still included in inventory at the year end? Therefore, answer B would not be selected as it incorrectly adds 100% of Purple Co and only 70% of Silver Co. Let’s consider each of the investments in turn to determine if control exists and, therefore, if they should be accounted for as a subsidiary. See Illustration 5 below for a typical MCQ on goodwill. IAS 28 also states that a holding of 20% or more of the ordinary (voting) shares can be presumed to give the investor significant influence unless it can be demonstrated otherwise. Put Off Là Gì, Answer The consolidation adjustment  is saying that the group has made a profit of $500 on items, which have not been sold on to a third party/non-group entity. This is why we need to include the fair value of the non-controlling interest in our goodwill calculation. endobj To submit your questions or ideas, or to simply learn more, see our about us page: link below. 0. The FA syllabus examines the principles contained in: Please note the syllabus does not cover Joint Ventures but IAS 28 is applicable to Associates which are covered. 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