Chapter 2 – Consolidated Statement of Financial Position

1. Basic principles of consolidated financial The impaired goodwill should be shared between 8. Elimination of inter co,. balances:
position: the Parent and NCI as per their percentages Before eliminate inter company receivables
 Show all assets and liabilities of parent +  Parent share of impairment of goodwill and payables better to reconcile the balances
subsidiary reduce from group reserves and eliminate the balance from receivables
 Intra group items are eliminated.(receivables  NCI share of impairment of goodwill reduce and from payables while consolidation.
and payables) NCI share of net assets Any cash or goods in transit then show the
Method of preparing CSFP Calculation of Goodwill –if NCI proportional amount in current asset as cash in transit or
 Investment of parent is replaced by the net method: in such case the goodwill is calculated for goods in transit.
assets acquired the parent only 9. URP on intercompany sale of fixed assets
 Cost of investment is cancelled out with the Cost of investment xx The URP on intercompany sale of fixed assets
share capital and retained earnings of Sub. Less parent share of NA of sub on acq. (xx) need to be
 This leaves the Net assets of group (P + S) -------  reduced from group reserves
 Share capital of parent and Goodwill xxxx  reduce from non current assets while
 Retained earnings of Parent + parent share of Less Impairment of goodwill (xx) consolidation.
post acquisition profit sub ------ 10. Midyear acquisitions: If parent acquired the
Standard Steps for Consolidated Financial Position: Balance goodwill carried to B/S xxx subsidiary during the year then calculate the pre
1. Group Structure (% of interest parent holding The entire impairment loss will be reduced from acquisition profits ( all profits up to the date of
in subsidiary group reserves acquisition are pre acquisition and it will be taken
2. Net assets of sub. At Acq. & Rep. Negative goodwill: to calculate net assets on acquisition to calculate
Particulars N A on N A on If cost of investment is less than net assets acquired goodwill. post acquisitions profits will be used to
acq rep it gives negative goodwill, which will be added to calculate parent share of post acquisition profit of
Share capital xx xx group reserves subsidiary to show in group reserves.
5. Calculation of NCI share of net assets
Share premium xx xx
Fair value of NCI xxx
Retained earnings xx xx
NCI share of post acq profits
Fair value increase xx xx
of subsidiary xxx
Fair value decrease (xx) (xx)
(NCI % x post acq profits )
Depreciation on FV
Less NCI share of GW impairment ( xxx)
increase (xx)
Less NCI share of URP on Inter
Depreciation on FV
co. sale of inventory (S to A)
decrease xx
(xxx)
xx xx Less NCI share of URP on inter co
The depreciation should be calculated from date of sale of non current assets (xxx)
acquisition to the date of reporting. ------
Retained earnings up to acq. is a part of pre acq. NCI share of net assets xxx
3. Calculation of Cost of investment ( show below equity in B/S)
Cash consideration xx 6. Calculation of group reserves
Share consideration xx Parent profits as on reporting xx
Deferred consideration xx Parent % of Sub post acq profits
Loan consideration xx (Parent % x post acq profits ) xx
------ Parent share of GW impairment (xx)
xx Parent share of URP on stocks (xx)
In case of deferred consideration, the PV future (whether parent sold or Sub sold)
payment need to be calculated using the rate of Parent share of URP on inter co.
discount given based on number of years sale of fixed assets (xx)
(PV of deferred consideration = FV x PV factor at % Negative goodwill if any xx
for stated number of years) (whether parent sold or sub sold) -----
4. Calculation of goodwill—NCI at fair value Group reserves carried to BS xx
Cost of investment by parent xx 7. URP on inter co. sale of inventory ( P to S)
Fair value of NCI xx Total URP on unsold goods reduce from
---- group reserves and from inventory
xx URP on inter co. sale of inventory (S to P)
Less NA on date of acq. ( xx) Total URP on unsold goods need to be
----- reduced from group reserves the parent
Total goodwill xx shares and from NCI net assets, NCI share
Less Impairment of goodwill (xx) as well reduce from inventory while
----- consolidating
Balance goodwill carried to B/S xx
 8.

5.