CONSOLIDATION WORKSHEET AND FINANCIAL

REPORT
Introduction

The financial accounting standards Boards is an organization that sets standards for
establishing and improving the accounting principles that are generally accepted. The standards
that are set by this board are referred to as accounting standards for financial reporting. The
transactions as well as other events in a business organization are specified by accounting
standards by recognizing, measuring, presenting and disclosing the statements of finance.
There are presently 31 accounting standards that can be applied to the various issues of
corporate groups. Accounting standards that are used for consolidated groups are identified for
applying in the various organizational issues. This case study is related to an organizational
issue that arises in Fluffy ltd and Glider ltd. On a specific date, shares of Glider ltd are acquired
by Fluffy ltd. There are several issues and financial transactions that happened between Fluffy
ltd and Glider ltd. The income statement and balance sheet of Fluffy ltd will be analyzed in this
financial report.
Calculations regarding the fair value, consolidated worksheets of Fluffy ltd and Glider ltd along
with the liabilities and assets of Glider ltd will be analyzed in this financial report. Interpretation
regarding the same will be done as well from the calculations and results derived.

Discussion

Some accounting standards and theory are maintained by organizations in their financial issues.
The theories and standards that are used by Fluffy ltd and Glider ltd to come with a solution
are GAAP and IFRS from Financial accounting standards board (Robinson, 2020). The
principles of Government accounting standards board, public company accounting oversight
board and the American Institute of CPA can also be used in solving organizational financial
issues by business organizations. The GAAP can be applied in areas including income
statement, balance sheet and cash flow statement (Battiston and Martinez-Jaramillo, 2018).
The various considerations that are needed in the application of GAAP are accounting period
of the business organization, historical cost, realization, and duality and matching along with
objectivity, prudence, consistency and materiality. Fluffy ltd and Glider ltd needs to apply
GAAP and the IFRS principles and theories for applying in the calculation of financial
statement, income statement and balance sheet of the consolidated values of the two business
companies (Williams and Dobelman, 2017).
The gross profit of Fluffy ltd is calculated by subtracting the cost of goods sold from the
company's revenues. The operating income of Fluffy ltd can be retrieved by calculating the

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gross profit after reducing the operating expenses from it. The operating income and the non-
operating items are to be calculated by adding them to get outcome as the net income of Fluffy
ltd (Hasibuan and Syahrial, 2019). There are some standards and objectives for laying down
principles as well as procedures in preparing and presenting the consolidated financial
statements. The financial statements of organizations generally are presented by the owner
company. In this case, Fluffy ltd will be the holding enterprise for presenting and providing
financial information regarding the economic activities of its business practices and
organization (Kim et al. 2016). The acquirer that is Fluffy ltd obtains the control Glider ltd by
a series of investments that are made by Fluffy ltd.
This is a business combination that is achieved by accomplishing stages and steps of accounting
standards. A non-controlling investment of equity is held by Fluffy ltd before acquiring the
control of Glider ltd. Business combination guidance is therefore needed to be followed by
Fluffy ltd in discussion and analysis of their financial reporting developments publication.
Fluffy ltd are accounted for the financial transactions that are to be present among the
organizational relevant shareholders with equity after taking control of Glider ltd. Application
of theories, principles and standards that includes GAAP and IFRS are done by Fluffy ltd in
the calculation and analysis of their income statement and balance sheet. The GAAP principles
that govern the consolidation of financial statements in Fluffy ltd suggests that the revenue,
cash, liabilities or assets are to be moved by the parent company to its subsidiary (Lisowsky et
al. 2017). This implies that the cash and revenues are to be necessarily invested in Glider ltd
by Fluffy ltd.
The company's entire status along with the financial status, assets and budgets can be retrieved
after the company analysis their financial statement with the consolidated financing system.
The position and status of Fluffy ltd can be known among its industry rivals by the consolidated
financial statements. This can be gained as the financial statements that are present in Fluffy
ltd are capable of providing a financial position to the company as well as its subsidiaries (Chen
et al. 2018). The asset balance as well as the claims on assets of Glider ltd are taken by Fluffy
ltd as this is a subsidiary of Fluffy ltd. The balance sheet as well as the income statement
financial worth of a company that depicts the organizational value. The assets, shareholder's
equity and liabilities are to be analyzed and calculated for Fluffy ltd. The analysis of the income
statement of Fluffy ltd helps analyses the efficiency of the company business at different points
of the organizational practice (Battiston and Martinez-Jaramillo, 2018).

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Analysis

Analysis and calculation for the balance sheet and income statement of Fluffy ltd is created for
the gain percentage of both the Companies. There are various types of values that are used for
both the countries of Fluffy Ltd and Glider Ltd in the consolidated worksheet. This type of
business combination normally takes the exact form of some kinds of statutory consolidation.
This is mainly ended up with certain targets that are mainly absorbed with some specified
business combinations (Smith et al. 2018). The acquisition of the inventory takes place for
Glider sold at $4500 to Fluffy Ltd. The cost of goods sold at $30900. The opening inventory
for Fluffy Ltd is $6600 and the closing inventory is $12450. The combination of the business
are to be created with the statutory merger. The Target Company or Flider Ltd will be leading
the combined entity. There are some of the consolidation process that are established with the
Consolidation worksheets. The identification of fair value are to be needed for various addition
paid-up capital and retained earnings. The established retained earnings for Fluffy Ltd is
$48000. The elimination of equity accounts are required for the process of investments that are
mostly appeared in the financial statements. The group transactions used for any types of
unrealized profits acquired by Fluffy Ltd. The net income outcome for Fluffy Ltd is $14985.
The Tax Rate is 30% for Fluppy Ltd. The cost of Plant is $120000 sold to Fluffy Ltd by Glider
Ltd. The sales price inducted by Glider Ltd is set up with a price of $9000. This has been
included the classification of various types of entity that are required for the profit of $1500.

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 Figure 1: Income Statement of Fluffy Ltd.
(Source: Excel)
The combination of the book values of some specific assets and liabilities that are associated
with the elimination of consolidated balance sheets in which merging of both companies are
shown (Jackowicz et al. 2017). The specific types of investments with some certain
incorporated for the legal entities established in some of the construction systems. The equity
method used in the accounting method for many types of undivided interests that are shown in
Fluffy Ltd. The interest holdings are to be set up by interest holders systems that are established
in many types of arrangement systems. The net income has some specific types of allocation
systems that include some of the purpose systems used in comprehensive arrangements. The
various types of methods that are allocated with some of the similar taxable earnings with the
help of the liquidation process. (sciencedirect.com, 2020) [Referred to Appendix 1]

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 Balance Sheet
200000
150000
100000
50000
0
Depreciation
Add: Total Fixed Plant Inventory Total
Current Assets Assets
Assets

Amount
Amount 21100
Amount Liabilities & Stockholders equity Liabilities Current liabilities
Amount Liabilities & Stockholders equity Liabilities Current liabilities
Amount
Amount 11000

Figure 2: Balance Sheet of Fluffy Ltd

(Source: Excel)

The consolidated financial statement of Fluffy Ltd has prepared with the International Financial
Reporting Standards for the IASB. The total Assets that are accumulated with a value of
$147100. The total liabilities and stockholders’ equity estimated at $147100. The Depreciation
cost that is supported with $1400 for plant acquired from Glider Ltd. Fluffy Ltd has acquired
all kinds of data that are established with the number of shares each valued at $3. The payment
of the investors are mainly shown in the balance sheet. The shareholder value of the equity
represents as $36000. The capital stock is also necessary for the net earnings of the Company.
The total liability represents as $36000. The income statement is mainly recorded for the
profitable statement of the Companies. (heinonline.org, 2020) [Referred to Appendix 2]

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 Figure 3: Balance Sheet
(Source: Excel)
These types of statements can show a clear amount of money gained or loss. This is mainly
evaluated from the calculations of the Balance sheet that are shown in excel. The current assets
of the Fluffy Company easily converted into the cash part for operating the cycle process. The
main operating cycle established for selling the product of Fluffy Ltd that are going in everyday
operations. The current liabilities have some of the short term debts which is mainly required
for the payment of the expenses (Williams and Dobelman, 2017). The current liabilities for the
usage of the credit and gains that are accessed for the growth of the business. The main
payments of the costs that are established for the utility expenses and also related to the long
term debt. The cash is converted to the liabilities for the basic depreciation systems used for
accounting the liability side of the Company. The normal values that are established with the
introduction of capital of Fluffy Ltd. The normal interest rate that is established for Fluffy ltd
acquired Glider Ltd. All the expenses which are established with different types of payroll
reports with some of the deductions procedures. The current ratio is also not sufficient for the
target company that is established. The liquid assets are also dependent on various types of
sales introduced in finance operations. The Market Capitalization has the values of the shares
that are used in many forms of the long term debts that are been established. The market
capitalization is mainly established with a decent percentage of working capital that is used for
50% of Glider Ltd. The main aggregate market capitalization that are been established for
various types of deduction established from the costs that are generated. The adjusted amount
for the stockholder equity is established with retained earnings and also the capital stock. The
total liabilities and the stockholder equity that are established for the acquisition of Fluffy Ltd.
The management system of the Company measures with some of the rates of return on money
invested. The ROI is mainly prioritized for the evaluation of efficient various number of
investments. From this comparing of the two Companies of Fluffy Ltd and Glider Ltd has
managed their credit score much better together. (Corporatefinanceinstitute.com, 2020)

Conclusion

From the above discussion, it can be concluded that a company requires the financial statement
consolidation for integrating and combining the accounting finances and functions of their
organization. This is done by Fluffy ltd for creating consolidated statements for organizational
finance and annual report showing the standards in income statement, balance sheet as well as

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cash flow of the organizational financial statement reporting. This includes the decisions of
Fluffy ltd for filing the consolidated financial statements along with the subsidiaries that are
annual. The annual statement of Fluffy ltd are chosen for advantages like tax and other
transactions as well. Fluffy ltd fulfils the criteria for filing the consolidated financial statements
as the company have major ownership on its subsidiaries. Glider ltd acts as the subsidiary that
is acquired by Fluffy ltd. Fluffy ltd have more than 50 % ownership over Glider ltd and are
eligible for including Glider ltd as its subsidiary for consolidated financial statement. The
GAAP and he IFRS are equally included by Fluffy ltd for creating the framework for financial
statement reporting of consolidated subsidiary. According to the reporting requirements that
are set by the board of accounting standards, Fluffy ltd and Glider Ltd will use the same
framework for accounting to prepare both consolidated and separate financial statements.

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Reference list

Books
Robinson, T.R., 2020. International financial statement analysis. John Wiley & Sons.
Battiston, S. and Martinez-Jaramillo, S., 2018. Financial networks and stress testing:
Challenges and new research avenues for systemic risk analysis and financial stability
implications.
Journals
Williams, E.E. and Dobelman, J.A., 2017. Financial statement analysis. World Scientific Book
Chapters, pp.109-169.
Hasibuan, R.P.S. and Syahrial, H., 2019, August. Analysis Of The Implementation Effects Of
Accrual-Based Governmental Accounting Standards On The Financial Statement Qualities.
In Proceeding ICOPOID 2019 The 2nd International Conference on Politic of Islamic
Development (Vol. 1, No. 1, pp. 18-29).
Kim, J.B., Li, L., Lu, L.Y. and Yu, Y., 2016. Financial statement comparability and expected
crash risk. Journal of Accounting and Economics, 61(2-3), pp.294-312.
Lisowsky, P., Minnis, M. and Sutherland, A., 2017. Economic growth and financial statement
verification. Journal of Accounting Research, 55(4), pp.745-794.
Chen, C.W., Collins, D.W., Kravet, T.D. and Mergenthaler, R.D., 2018. Financial statement
comparability and the efficiency of acquisition decisions. Contemporary Accounting
Research, 35(1), pp.164-202.
Smith, J.M., Driver, R. and Matthews, W., 2018. The Real Options Lattice: An Alternative to
Discounted Cash Flow. Journal of Accounting & Finance (2158-3625), 18(7).
Jackowicz, K., Mielcarz, P. and Wnuczak, P., 2017. Fair value, equity cash flow and project
finance valuation: ambiguities and a solution. Managerial Finance, 43(8), pp.914-927.
Online articles
sciencedirect.com (2020). A variational mode decompoisition approach for analysis and
forecasting of economic and financial time series. Available at:
https://www.sciencedirect.com/science/article/pii/S0957417416300562
heinonline.org (2020). Cost-Benefit Analysis and the Structure of the Administrative State:
The Case of Financial Services Regulation. Available at:
https://heinonline.org/HOL/LandingPage?handle=hein.journals/yjor34&div=15&id=&page=
Websites
corporatefinanceinstitute.com (2020).

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Statement of Cash Flows - Corporate Finance Institute. Available at:
https://corporatefinanceinstitute.com/resources/knowledge/accounting/statement-of-cash-
flows/

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Appendices

Appendix 1: Financial information

(Source: https://slideplayer.com/slide/6041737/)

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Appendix 2: Vertical Analysis

(Source: https://efinancemanagement.com/financial-analysis/vertical-analysis)

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