F Payment made at a later date to acquire Subsidiary

Impacts:
1. Record the PV of the the future payment in Purchase consideration.
2. At the year end, unwind the PV, record the increase as finance cost &
deduct it from GRE W5.
3. Add the increase to the liability found on day 1 to get the year end liability.

Purchase Consideration
Cash paid right now : 10 million
PV of Cash paid after 3 year : 5million/(1.2^3)

Day 1
Dr. Cost of Investment
Cr. Deffered Consideration
Cr. Cash

Last day of FY
Dr. Finance Cost ( 3m * 20%)
Cr. Deffered Consideration

G Share Exchange

Question from FR notes

Shars acquired by Apple : 24 million

Shares given by Apple : 24 million/ 3 * 2 = 16 million shares
Worth of the 16 million shares offered = 16 * 2 = 32 million

Purchase Consideration:
Cash paid right now = 10 million
Share exchange = 32 million
42 million

Day 1

Dr. Cost of Investment 42 million

Cr. Cash 10 million
Cr. Share Capital 16 million (16 million shares X $1 nominal value)
Cr. Share premium 16 million
 10
2.8935185185
13

13 million
3 million
10 million

0.6
0.6
Polestar
COSFP
Asset W1
NCA
PPE (+ 2000 - 100 + 41000+ 21000) 63900
Investment 0
CA (-600 + 19000+ 4800 ) 23200 W2

SC
Total Assets 87100 SP
RE
Equity & Liabilities FV inc
Equity URP
SC 30000
RE 29950
NCI 2850 W3

CL
Contingent Consideration 1500
Other CL (15000+7800) 22800

Total equity & liability 87100 W4

W5

W6

W7
W8
Working Notes

Group Structure
P-------S
75%

Net Assets of subsidiary

At Acq Rep Post
6000 0
0 0
14300 -2300
2000 -100
-600 W5 GRE -2250
22300 -3000 W4 NCI -750

Goodwill
Purchase consideration 15300
Add: NCI 3600
Less: Net worth -22300
Negative Goodwill -3400

NCI
NCI at acq 3600
NCIs share -750
2850

GRE
Parents RE 28500
Parents share -2250
Add: Decrease in liab 300
Add: Negative Goowill 3400
29950

Purchase Consideration
Cash paid 1.5 * (75% of 12000) 13500
Contingent Consideration 1800

15300

URP
Profit = 9-5.4 = 3.6 million
Margin% = 3.6/9*100 = 40%
URP = 40% of 1.5 million = 600

Retained earnings

RE at the year end 12000

Less: Profit after acquisition 2300
RE at the date of acquisition 14300
 Consolidated Statement of Profit and Loss

A Rules of Consolidation

1 Consolidate the profit & loss items of parent & subsidiary line by line.
2 Show a split of profit to parent and NCI at the end.
3 Workings:
W1 Group Structure
W2 NCI as per PL

B Intra group transactions

Nullify the common revenue & cost of sales item.

C Interest Income & Expense

Nullify the common interest income & expense

D Dividend Income
Nullify any dividend income from subsidiary in consolidated profit & loss

Question from FR Notes : Rahul & Ravi

Consolidated Statement of Profit & Loss

Revenue 3200
Cost of sales -2880
Gross Profit 320 W1
Operating expenses 0
Profit before tax 320
Income Tax expense -155
Profit after tax 165 W2
Profit attributable to :
Parent : 155
NCI: 10

E URP
Inventory
1. Regardless of the seller, add URP to COS.
2. Check the seller:
Parent: Nothing required further.
Subsdiary : Deduct URP from W2 NCI as per PL
 COS = (Opening inventory + Purchases - Closing inventory) + URP

Unsold goods = $ 40
URP = $ 10
COS =500+100 -40
=500+100-40+10
OR
=(500+100-(40-10))

PPE
1. Regardless of the seller and buyer, add URP to COS, deduct excess dep from COS.
2. Check the seller:
Parent: Nothing required further.
Subsdiary : Deduct URP from W2 NCI as per PL
3. Check the buyer:
Parent: Nothing required further.
Subsidiary : Add excess dep to W2 NCI as per PL

F Impairment of Goodwill
1. Charge the impairment in the line item mentioned by the examiner, else in adminstrative expenses/ Operating
2. Check the method of NCI calculation:
Proportion of Net assets method: Nothing required further
FV method : Deduct the impairment from W2 NCI as per PL

G FV Increase in Subsidiarys asset at acquisition

1. Charge the depreciation in the specific line mentioned by the examiner, else cost of sales.
2. Deduct the FV depreciation from W2 NCI as per PL

Question from FR Notes

Revenue (-20 880 W1

Less: COS (+4 - 20 + 15 -499
GP 381
Operating expenses (+ 5 -143
Profit from operations 238
Finance costs -3 W2
Profit before tax 235
Income tax expense -82
Profit after tax 153
Profit attributable to :
Parent: 139
NCI: 14

W3
Working Notes

Group Structure
P-----S
75%

NCI as PL
Subsidiarys Profit 40
Adjustments to 0
subsdiarys profit

Adjusted Profit 40
NCI (25% of 40) 10
tive expenses/ Operating expenses.

Working Notes

Group Structure
P-----S
75%

NCI as per PL
Subsidiarys Profit 80
Less: URP -4
Less: Impariment of goodwill -5
Less: FV Dep -15
Adjusted Profit 56
NCIs share 14

URP
Unsold goods = 80% of 20000 = 16000
CP 100
P 33.33
SP 133.33 16000

URP 3999.7 =4000