FR3&4 Consolidated SFP Notes (Stud)

Accounting for Groups:
Consolidated Statement of
Financial Position
Sessions 3 & 4
AC2091: Financial Reporting
Learning Outcomes
• describe a ‘group’
• compute the value of goodwill and non-
controlling (minority) interest
• describe the rationales used to develop
different models of consolidation
(acquisition, merger, equity, proportional)
• prepare consolidated statement of financial
position using the acquisition, equity and
proportional consolidation methods
Relevant Accounting Standards
o IFRS 3 Business Combinations (revised 2008)
o IFRS 10 Consolidated Financial Statements
(from 2013 onwards)
o IFRS 13 Fair Value Measurement
o IAS 27 Separate Financial Statements
o IAS 36 Impairment of Assets
o IAS 38 Intangible Assets
Introduction
• Companies may invest in other companies
• Reasons:
– Growth [faster and perhaps cheaper way
compared to internal growth]
– Synergies/ economies of scale
– Prevent take-over
– Secure source of supply
– Reduce competition
– Utilise financial strength of acquiree
Introduction
• Group structures
Simple Complex
A
A
B C
B
C D E F G
Accounting for Groups
• Definition of group
– Exists where one enterprise controls, either
directly or indirectly, another enterprise
– Consists of a parent and its subsidiaries
(IFRS 10)
• Parent
– An entity that controls one or more entities
• Subsidiary
– An entity that is controlled by another entity
Accounting for Groups [IFRS 10]
• Control
– An investor controls an investee when it is
exposed, or has rights, to variable returns
from its involvement with the investee and
has the ability to affect those returns
through its power over the investee
Control
Rights to variable Ability to affect Power over

returns variable returns investee
7
Accounting for Groups
• Investor has control over investee if
investor has ALL the following:
– power over the investee;
– exposure, or rights, to variable returns from
its involvement with the investee; and
– the ability to use its power over the investee
to affect the amount of the investor’s returns
Test of Control : Power
• existing Rights that give

investor the current ability to direct
Power the relevant activities
• activities that significantly

affect the investee’s returns
Relevant
Activities
9
• Examples of rights include:
– voting rights (or potential voting rights) of an investee
– rights to appoint, reassign or remove members of an
investee’s key management personnel who have the
ability to direct the relevant activities;
– rights to appoint or remove another entity that directs
the relevant activities;
– rights to direct the investee to enter into, or veto any
changes to, transactions for the benefit of the investor;
and
– other rights (such as decision-making rights specified in
a management contract) that give the holder the ability
to direct the relevant activities
• Potential voting rights
– Instruments which have the potential, if exercised or
converted, to give the entity voting power
• E.g. share options, convertible notes
– Given due consideration when assessing ‘capacity to control’
– As per Basis for Conclusions to IFRS 10
• Potential voting rights can give the holder the current
ability to direct the relevant activities
• This will be the case if those rights are substantive and on
exercise or conversion (when considered together with
any other existing rights the holder has) they give the
holder the current ability to direct the relevant activities
• The holder of such potential voting rights is, in effect, in
the same position as a passive majority shareholder
• Delegation of power
– Whether power to be exerted over the entity is being
used in the context of an agency relationship, or is
power being exercised to benefit the investor directly
– If an entity has power, but is acting under the direction of
another entity - perhaps as an ‘agent’ of that other entity -
then control would not be deemed to exist and the entity
would not be required to consolidate the entity over which it
had power
• Examples of relevant activity include:
a) selling and purchasing of goods or services;
b) managing financial assets during their life (including
upon default);
c) selecting, acquiring or disposing of assets;
d) researching and developing new products or
processes; and
e) determining a funding structure or obtaining funding.
13
Test of Control : Variable Returns
•
as a result
of the performance of an investee
Variable • can be only positive, only negative or
Returns both positive and negative
•
from its involvement as a result of the
investee’s performance
Exposure/ • assessed based on substance of
arrangement regardless of legal form of
Rights returns
14
Test of Control : Variable Returns
• Examples of include:
a) Dividends, interest and changes in the value of
the investment
b) remuneration for servicing assets or liabilities
c) fees and exposure to loss from providing credit or
liquidity support
d) returns that are not available to other interest
holders
Test of Control : Power & Returns
• Link between power and returns
– ability to use its power to affect the investor’s
returns from its involvement with the investee
– an investor with decision-making rights shall
determine whether it is a principal or an agent.
– an agent does not control an investee when it
exercises decision-making rights delegated to it
Accounting Requirements
• An entity that is a parent shall present
consolidated financial statements
• Results and financial position of a group as if it
were operating as a single economic entity
– consolidated statement of profit or loss & other
comprehensive income will show the financial
results derived from operations with external parties
– consolidated statement of financial position will
show the total assets controlled by the economic
entity and the total liabilities owed to parties outside
the economic entity
• Example: P owns 80% of S
P Income/Assets
External
80%
Parties
S Expenses/Liabilities
20%
Non-Controlling Interest
• Non-Controlling Interest
– Equity in a subsidiary not attributable, directly
or indirectly, to a parent [IFRS 10]
– Non-controlling shareholders’ proportionate
share in net assets of subsidiary
– Represented by shareholders’ capital
contribution and their share of reserves
References: Tan, L.T (2013); Ng, E.J et al. (2013)

• Exemptions from consolidation
– Parent is a wholly-owned or partially-owned
subsidiary and owners do not object to it not
preparing consolidated financial statements
– Its securities are not publicly traded
– It is not in the process of issuing securities
– Ultimate/intermediate parent publishes
consolidated financial statements and comply
with IFRS
– Parent is an investment entity required to to
measure all of its subsidiaries at fair value
through profit or loss in accordance to IFRS 9
Consolidated
Statement of P/L Consolidated
& Other Statement of
Comprehensive Cash Flows
Income
Consolidated Parent company

Statement of financial
Financial Position statements
Consolidated
Financial
Statements
Consolidation Theories
Models of Group Accounting
Model Description
Entity model ▪ Stresses on common control regardless

(Economic entity of ownership
model) ▪ Does not makes a distinction between
different shareholders (controlling and
non-controlling) in the companies that
comprise the group
▪ Non-controlling interests are treated as
part of consolidated equity
▪ All assets and liabilities of the parent
entity and subsidiaries included
% of parent + % of subsidiary
22
Model Description
Proprietary ▪ Stresses on ownership interest rather

model than control
▪ Shareholders of parent are the only
relevant users and they are only
interested in equity shares they own
▪ Non-controlling interest is not included
▪ All assets and liabilities of the parent
entity and only a proportionate share of
the subsidiaries’ assets and liabilities
included:
% of parent + parent’s share in
23
subsidiary
Model Description
Parent entity ▪ All assets and liabilities of the parent

model and subsidiaries are included
of parent + of subsidiary
▪ Non-controlling interest typically treated
as a liability
24
Consolidation Methods
Methods of Consolidation
Method Description
Acquisition ▪ Used to account for holding company
method (or parent) to subsidiary relationships
▪ The acquirer purchases the interests of
the acquired company’s shareholders
Merger or ▪ Formerly used in accounting for
pooling of combinations of equal entities
interest method ▪ The two parties combine to create a
new entity (i.e. the uniting of the
interests of two formerly distinct
shareholder groups)
▪ Banned under IFRS 3
25
Consolidation Methods
Method Description
Equity method ▪ Typically used in group accounting for
associates
▪ Investment by the holding company into
another company treated at cost and
adjusted thereafter for share of profits
Proportional ▪ Typically used in group accounting for
method joint ventures.
▪ Derived from the proprietary model of
accounting
26
Acquisition vs. Merger Methods
Acquisition Merger (pooling of interest)
▪ Shares issued ▪ Shares issued accounted for

accounted for at fair at nominal value (i.e. no
value share premium account)
▪ Assets & liabilities of ▪ Assets & liabilities of
acquired are combining entities are
consolidated at fair consolidated at book values
values
▪ Goodwill on ▪ No goodwill, either positive
consolidation may arise or negative, is recorded
27
Acquisition vs. Merger Methods
Acquisition Merger (pooling of interest)
▪ Reserves and profits of ▪ Reserves and current-year

acquired are eliminated profit are added together as
at acquisition date; only if combination occurs since
post-acquisition reserves commencement of business
and profit are included in
consolidated statements
(Ng. E.J; 2013)
❖ Merger method has been disallowed. Except for

businesses under common/shared control, all other
business combinations are to use acquisition method.
28
(IFRS 3)
IFRS 3 Business Combinations
• Transaction in which an acquirer obtains control of one
or more businesses
– Business defined as an integrated set of activities
and assets that is capable of being conducted and
managed for the purpose of providing a return in the
form of dividends, lower costs or other economic
benefits directly to investors or other owners,
members or participants
– Acquirer: Entity that obtains control of the acquiree
– Acquiree: The business or businesses that the
acquirer obtains control of in a business combination
• Transaction accounted for as
if assets do not constitute a business
• An entity shall account for each business
combination by applying the acquisition method
(c) (d)
(a) (b)
Recognition & Recognition &
Identifying Determination measurement measurement
the acquirer of acquisition of net assets of goodwill on
date and NCI consolidation
Acquisition Method [IFRS 3]
Step Description
Identify acquirer ▪ Acquirer: entity that obtains control of
the acquire
▪ Acquiree: business(es) that the acquirer
obtains control of in a business
combination
▪ Test for control as per IFRS 10
Determine ▪ Date on which acquirer obtains control
acquisition date of the acquiree
▪ Usually closing date but may be earlier
if control is obtained before that
31
Step Description
Recognise & Recognition
measure ▪ Identifiable assets & liabilities
identifiable recognised separately from goodwill
assets & ▪ Must meet definition of assets &
liabilities liabilities under Conceptual Framework
▪ Must be part of what are exchanged in
the business combination transaction
o E.g. acquisition costs are expensed off
▪ Possible for the acquirer to recognise
assets and liabilities not previously
recognised in acquiree’s financial
statements, including
o Internally generated brand name,
contingent liabilities 32
Step Description
Recognise & Measurement
measure ▪ Measure the identifiable assets
identifiable acquired and the liabilities assumed at
assets & their
liabilities ▪ If subsidiary undertook and recorded
the revaluation of non-current assets, a
“revaluation reserve” would be part of
shareholders’ equity at the date of
acquisition
▪ If not recorded, the revaluation will be
adjusted for during the consolidation
process
33
Step Description
Recognise & ▪ Measured at:
measure non- 1) proportionate share of subsidiary’s
controlling identifiable net assets
interests o no goodwill is calculated as being
attributable to non-controlling interests
o known as the “partial goodwill method”
2) fair value
o goodwill attributed to both parent and
non-controlling interests
o often called the “full goodwill method
34
Step Description
Recognise & ▪ Excess of consideration transferred
measure over the fair value of net identifiable
goodwill assets at the date of acquisition
o Represents future economic
benefits arising from assets
acquired that are not individually
identified and separately recognised
▪ Positive goodwill recognised as
and tested for impairment annually
▪ Negative goodwill recognised as gain
from bargain purchase in
35
Illustration 1: Business Combination
P Ltd acquired 80% of the issued share capital of S Ltd on 31
December 20X9 for £700,000 cash. On acquisition date, the
assets and liabilities of S Ltd are as follows
Carrying Amount Fair Value
£’000 £’000
Property, plant & equipment 450 510
Inventory 200 130
Accounts receivables 150 150
Bank 50 50
Bank loan 150 150
Accounts payable 100 100
Share capital 400
Retained earnings 200
S Ltd has an internally generated a brand name, which has a
fair value of £80,000 but it is not recognised in its accounts as
at the acquisition date. A contingent liability amounting to
£20,000 is disclosed in the company’s notes to financial
statements.
Non-controlling interest is measured at the non-controlling

interest’s proportionate share of the subsidiary’s identifiable
net assets.
Required:
Calculate the goodwill arising from the business combination
as well as the non-controlling interest as at acquisition date.
December 20X9. On acquisition date, the assets and liabilities
of S Ltd are as follows
Carrying Amount Fair Value
£’000 £’000
Inventory 200 250
Accounts receivables 150 150
Bank 50 50
Share capital 400
Retained earnings 200
Revaluation reserve 150
P Ltd paid a total consideration of £700,000 for the
acquisition, 30% of which is paid for by cash and the
remainder by issue of 300,000 ordinary shares in P Ltd. The
par value of each ordinary share of P Ltd is £1.
Non-controlling interest is measured at fair value. Share

capital of S Ltd as at the acquisition date comprises 400,000
ordinary shares which are trading at £2.50 on the same day.
Required:
Calculate the goodwill arising from the business combination
as well as the non-controlling interest as at acquisition date.
Financial Position
• Principles in preparing consolidated statement
of financial position [IFRS 10]:
– Add together items owned/owed by each entity
(e.g. assets owned; liabilities to external parties)
– Cancellation of like items internal to group (e.g.
intra-group transactions/debts)
– Consolidate as if group owned everything and then
show extent to which group does not own
everything
– Consolidated statements should be prepared using
uniform accounting policies for like transactions and
other events in similar circumstances
Financial Position
Should NOT show
Share capital
Unrealised
Investment & pre-
profits,
in subsidiary acquisition
intragroup
account reserves of
debt/trading
subsidiary
Financial Position
• Eliminate investment in subsidiary account
– Cost of investment account in the holding
company relates to net assets of the subsidiary
– Eliminated to avoid double-counting since
consolidated statements presented as single
entity
– Not meaningful to show entity having “investment
in itself”
Financial Position
• Elimination of subsidiary’s equity
– Assets and liabilities of the subsidiary are added
together with those of the holding company
– Since net assets = equity, adding the subsidiary’s
owners’ equity into consolidated statements would
be double-counting the same set of numbers
• Elimination of intragroup transactions
– Intragroup assets and liabilities, equity, income,
expenses and cash flows relating to transactions
between entities of the group are eliminated in full
Financial Position
• Points to note:
– Share capital shown is the share capital of the
parent only
– Reserves shown comprise of reserves of the
parent, plus the group’s share of the profits earned
by subsidiary less any dividends paid by subsidiary
– Amount by which subsidiary is financed by
outsiders is presented under Non-Controlling
Interests (NCI) within equity but separate from
parent’s shareholders
• NCI: Equity in a subsidiary not attributable, directly or
indirectly, to a parent
Illustration 3: Asset Revaluation
P Ltd acquired 100% of the issued share capital of S Ltd on
31 December 20X9 for total consideration of £200,000. The
statements of financial position of P Ltd and S Ltd as at 31
December 20X9 are as follows:
SoFP as at 31 Dec 20X9 P Ltd S Ltd
£’000 £’000
Building 300 150
Investment in S Ltd 200 -
Inventory 150 40
Bank 50 30
700 220
Share capital 400 120
Retained earnings 200 50
700 220
Illustration 3: Asset Revaluation
The fair value of building and inventory for S Ltd as at the
date of acquisition were £180,000 and £20,000
respectively.
Required:
Prepare a consolidated statement of financial position as at
31 December 20X9 for P Ltd group.
Illustration 4: Negative Goodwill
P Ltd acquired 100% of the issued share capital of S Ltd on
31 December 20X9 for total consideration of £150,000.

£’000 £’000
Accounts receivables 150 -
Bank 100 70
700 220
700 220
Illustration 4: Negative Goodwill
S Ltd has an internally generated a brand name, which has a
fair value of £40,000 but it is not recognised in its accounts as
at the acquisition date. A contingent liability amounting to
£20,000 (payable in 6 months’ time) is disclosed in the
company’s notes to financial statements.
Required:
Non-Controlling Interest
• Entity concept/full consolidation method:
– 100% of subsidiary’s assets and liabilities are
added to those of parent
– Presented in the consolidated statement of

financial position within equity, separately from
the equity of the owners of the parent
• An entity shall attribute the profit or loss and
each component of other comprehensive
income to the owners of the parent and to the
non-controlling interests
49
References: Tan, L.T (2013); Ng, E.J et al. (2013)
Illustration 5: Non-Controlling Interests
December 20X9 for total consideration of £200,000.
£’000 £’000
Bank 50 70
700 220
700 220
Required:
Prepare a consolidated statement of financial position as at 31
December 20X9 for P Ltd group if NCI was calculated at (a)
proportionate share of subsidiary’s net assets and (b) fair value.
Pre & Post Acquisition Reserves
Pre & Post Acquisition Reserves
Reserve Description
Pre-acquisition ▪ Reserves of subsidiary as at
reserves
▪ To be eliminated against
in consolidation process
▪ Included in calculation of goodwill
Post-acquisition ▪ Profits of subsidiary earned
reserves
▪ Group’s share of post-acquisition
reserves are included in
51
Illustration 6: Pre/Post Acq. Reserves
The statements of financial position of P Ltd and S Ltd as at
31 Dec 20X9 are as follows:
£’000 £’000
Bank 50 70
700 220
Share capital (£1 each) 400 100
700 220
P Ltd acquired 80,000 shares in S Ltd on 1 January 20X8 for

total consideration of £200,000.
Illustration 6: Pre/Post Acq. Reserves
On the acquisition date the share capital and retained
earnings for S Ltd were £100,000 and £30,000 respectively.
The fair value of an equipment for S Ltd on the same day was
assessed to be £50,000. The equipment had a net book value
of £30,000 on 1 January 20X8 and depreciation for the
equipment was expected to increase by £2,500 per annum for
the next 4 years from that day onwards.
Non-controlling interest is measured at the non-controlling

interest’s proportionate share of the subsidiary’s identifiable
net assets.
Required:
Intragroup Indebtedness
• Group should not report amounts receivable
from or payable to itself in the conso SoFP
• Intragroup outstanding receivables and
payables, loans and advances should be
eliminated upon consolidation
• Balances between the parties in the
balance sheet should be eliminated
– Differences in balances may occur due to
cash and stock in transit
54
Intragroup Transactions: At Cost
• Goods may be sold or transferred between
group companies at cost
• On consolidation, revenue and cost of goods
sold relating to the intragroup transaction
should be eliminated
– No impact on consolidated net income
• Intragroup balances should be eliminated
Illustration 7: Intragroup – at Cost

£’000 £’000
Building 300 150
Inventory 40 70
Current account with S Ltd 90 -
Cash 70 10
700 230
Current account with P Ltd - 50
700 230
Illustration 7: Intragroup – at Cost
January 20X8 for total consideration of £200,000. The share
capital and retained earnings for S Ltd on the acquisition date
were £120,000 and £20,000 respectively.
The difference in current accounts is due to the following:

On 29 December 20X9, P sold and despatched goods to S at
cost of £30,000. P had recorded the transactions accordingly
in its books but S had not received the goods as at year end.
On 31 December 20X9, S paid £10,000 to P but the payment

had not been had not been received by P at year end.
Required:
Intragroup Transactions: At Profit or Loss
• Intragroup trading may involve one group
entity selling to another at a profit
• If goods remain in the inventory, any
unrealised profit is eliminated on consolidation
– Cancel out any profit ‘made’ by the seller as
gain only achieved when goods or service sold
to
– Closing inventory to be valued at cost to the
group, i.e. any
held by the purchaser
58
Intragroup Transactions: At Profit or Loss
• If parent sells to subsidiary [downstream]
– remove unrealised profit in parent’s books
• Dr Group retained earnings
Cr Group inventory [closing]
• If subsidiary sells to parent [upstream]
– remove unrealised profit in subsidiary’s books
– reduction of earnings in subsidiary borne by
• Dr Group retained earnings (parent’s share)

Non-controlling interest (NCI’s share)
Cr Group inventory [closing]
59
Illustration 8: Intragroup - Inventory

£’000 £’000
Building 300 150
Inventory 150 60
Bank 50 10
700 220
700 220
January 20X8 for a total consideration of £200,000. The
share capital and retained earnings for S Ltd on the
acquisition date were £120,000 and £30,000 respectively.
During the year ended 31 December 20X9, P Ltd had sold

goods to S Ltd for £100,000 at a mark-up of 25%. A quarter of
these goods are still unsold and remains in the inventory of S
Ltd as at 31 December 20X9.
Required:
£’000 £’000
Building 300 100
Inventory 110 60
Trade receivables 40 50
Bank 50 10
700 220
Trade payables 100 50
700 220
During the year ended 31 December 20X9, S Ltd had sold

goods to P Ltd for £100,000 at a margin of 20%. Half of these
goods are still unsold and remains in the inventory of P Ltd as
at 31 December 20X9. On the same day, P Ltd owes S Ltd
£20,000 for goods purchased and this is included in the trade
payables of P Ltd and trade receivables of S Ltd.
Required:
Intragroup Asset Sale
• Intragroup sales of depreciable assets (or transfers
not made at their book values) results in:
– Disposing entity recording a
– Purchasing entity provides depreciation based on
the
• Intragroup profit or loss on asset sale/transfer is
eliminated and depreciation corrected for over- or
under-provision
– Assets should be recorded at the
and depreciation based on that cost
– If the assets are recorded at net book value, the
cumulative amount of profit on sale less additional
depreciation should be removed
64
References: Tan, L.T (2013)
Intragroup Asset Sale
• Unrealised profit on sale of non-current asset
Dr Non-current assets [buyer]

Dr Gain on disposal of asset [seller]
Cr Accumulated depreciation [buyer]
• Over-depreciation of non-current asset
Dr Accumulation depreciation [buyer]

Cr Depreciation [seller]
[Note: NCI bears its share of the reduction of earnings in

subsidiary for upstream sale, i.e. from subsidiary to
parent entity]
References: Tan, L.T (2013)

Illustration 10: Intragroup Asset Sale
The statements of financial position of P Ltd and S Ltd
as at 31 Dec 20X9 are as follows:
£’000 £’000
Property, plant & equipment (net) 250 120
Inventory 80 60
Bank 100 70
780 280
Retained earnings (31 Dec 20X8) 150 30
Profit for the year 20X9 50 20
780 280
P Ltd acquired 80% of the issued share capital of S Ltd
on 31 December 20X5 for total consideration of
£200,000. The share capital and retained earnings for S
Ltd on that day were £120,000 and £30,000 respectively.
On 1 July 20X9, S Ltd sold an equipment with a carrying

amount of £60,000 to P Ltd for £100,000, with the profit
included in S Ltd’s profit for 20X9. The equipment was
acquired on 1 July 20X8, does not have any residual
value and has a useful life of 5 years [which remains
unchanged after the asset transfer]. It is the policy of the
group [and all its companies] to depreciate equipment
using the straight-line method.
During the year, P Ltd sold goods to S Ltd for £30,000.
These goods had cost P Ltd £20,000. £9,000 of the
goods sold remained in S Ltd’s closing inventory.
Required:
Prepare a consolidated statement of financial position as
at 31 December 20X9 for P Ltd group.
Intragroup Dividends
• Parent recognises dividend income from its
investment in subsidiaries when the shareholders’
right to receive dividend is established
• in parent’s accounts should be
eliminated against in subsidiary’s
accounts if dividends be declared but not paid
Dr Dividends payable in subsidiary’s books

Cr Dividends receivable in parent’s books
• If subsidiary is partially owned, portion of dividends

is payable to NCI and included in
of consolidated statement of financial position
69
Intragroup Dividends
• Dividends paid from pre-acquisition profits
– Dividends paid by a subsidiary are to be recorded
as dividend revenue in the parent entity’s accounts
– Reduces the net assets of the subsidiary and may
cause “Investment in Subsidiary” to fall below
original cost of investment (i.e. impairment loss)
– Impairment loss to be reversed as a consolidation
adjustment before eliminating the parent’s
“Investment in a Subsidiary” against the share
capital and reserves of the subsidiary as at the date
of acquisition
Illustration 11: Dividends / Goodwill
£’000 £’000
Dividend receivable 20
Bank 50 60
700 240
Dividend payable - 25
700 240
Illustration 11: Dividends / Goodwill
Goodwill is to be impaired by 50% after a review conducted

on 31 October 20X9. S Ltd declared a dividend payable of
£25,000 during 20X9. P Ltd has recognised a dividend
receivable of £20,000 in its statement of financial position.
Required:
31 December 20X9 for P Ltd group if NCI was calculated at
the proportionate share of subsidiary’s net assets.
Illustration 12: Goodwill / Bonds
£’000 £’000
Investments 230 -
Bank 70 64
730 244
10% Bonds 30 40
730 244
Illustration 12: Goodwill / Bonds
Goodwill is to be impaired by 50% after a review conducted

on 31 October 20X9. On 1 January 20X9, S Ltd issued
£40,000 of bonds, 75% of which were bought by P Ltd. Bond
interest of 10% has not been paid nor accounted for in the
books of both companies. All bonds had been issued at par.
Required:
31 December 20X9 for P Ltd group if NCI was calculated at
fair value.
Thank You
Q&A
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FR3&4 Consolidated SFP Notes (Stud)

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FR3&4 Consolidated SFP Notes (Stud)

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Accounting for Groups:

Rights to variable Ability to affect Power over

• existing Rights that give

• activities that significantly

References: Tan, L.T (2013); Ng, E.J et al. (2013)

Consolidated Parent company

Entity model ▪ Stresses on common control regardless

Proprietary ▪ Stresses on ownership interest rather

Parent entity ▪ All assets and liabilities of the parent

▪ Shares issued ▪ Shares issued accounted for

▪ Reserves and profits of ▪ Reserves and current-year

❖ Merger method has been disallowed. Except for

Non-controlling interest is measured at the non-controlling

Non-controlling interest is measured at fair value. Share

Should NOT show

SoFP as at 31 Dec 20X9 P Ltd S Ltd

– Presented in the consolidated statement of

P Ltd acquired 80,000 shares in S Ltd on 1 January 20X8 for

Non-controlling interest is measured at the non-controlling

SoFP as at 31 Dec 20X9 P Ltd S Ltd

The difference in current accounts is due to the following:

On 31 December 20X9, S paid £10,000 to P but the payment

• Dr Group retained earnings (parent’s share)

SoFP as at 31 Dec 20X9 P Ltd S Ltd

During the year ended 31 December 20X9, P Ltd had sold

During the year ended 31 December 20X9, S Ltd had sold

Dr Non-current assets [buyer]

• Over-depreciation of non-current asset

Dr Accumulation depreciation [buyer]

[Note: NCI bears its share of the reduction of earnings in

References: Tan, L.T (2013)

On 1 July 20X9, S Ltd sold an equipment with a carrying

Dr Dividends payable in subsidiary’s books

• If subsidiary is partially owned, portion of dividends

Goodwill is to be impaired by 50% after a review conducted

Goodwill is to be impaired by 50% after a review conducted

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