Course Syllabus EBC4074 Advanced Financial Accounting Period 4 Academic Year 2021/2022

Course Syllabus
EBC4074
Advanced Financial Accounting
Period 4
Academic year 2021/2022
© 2022 Maastricht University
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted in any form or by any means of electronic, mechanical, photocopying, recording, or
otherwise, without the prior written permission of the publisher or the authors.
EBC4074 Advanced Financial Accounting
Table of contents
1. Introduction............................................................................................................................................. 2
2. Prior knowledge ...................................................................................................................................... 2
3. Literature .................................................................................................................................................. 3
4. Course coordination ............................................................................................................................... 4
5. Organization of the course .................................................................................................................... 4
5.1. Schedule for regular students ............................................................................................................. 5
5.2. Schedule for part-time students......................................................................................................... 6
6. Assessment and grading......................................................................................................................... 7
6.1. Participation ......................................................................................................................................... 7
6.2. Group Assignments ............................................................................................................................ 7
6.3. Closed-book Exam .............................................................................................................................. 7
7. Code of Conduct .................................................................................................................................... 9
8. Meetings ................................................................................................................................................. 10
Meeting 1: Introduction and Conceptual Framework ......................................................................... 11
Meeting 2: Revenue Recognition ............................................................................................................ 14
Meeting 3: Income Taxes (1) ................................................................................................................... 17
Meeting 4: Income Taxes (2) ................................................................................................................... 20
Meeting 5: Business Combinations ........................................................................................................ 22
Meeting 6: Wholly owned subsidiaries and intragroup transactions ................................................. 24
Meeting 7: Non-Controlling Interest ..................................................................................................... 27
Meeting 8: Consolidation Case ............................................................................................................... 31
Meeting 9: Q&A Session before the exam ............................................................................................ 32
Meeting 10: Earnings Quality .................................................................................................................. 33
Meeting 11: Exam on Consolidation and Income Taxes .................................................................... 34
Meeting 12: Presentations Group Assignment 3 ................................................................................. 35
Appendix A…………………………………………………………………………………...39
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1. Introduction
The master course EBC4074 Advanced Financial Accounting focuses on various advanced
financial accounting and reporting topics. It is targeted at students preparing for careers in which
they extensively use, prepare, or audit financial statements. The course focuses specifically on
financial reporting issues faced by large, internationally operating organizations. A major part of
the course is dedicated to business combinations and the preparation of consolidated financial
statements. The course will be taught using International Financial Reporting Standards (IFRS).
Next to the application of the relevant standards and interpretations, the course will also deal with
the rationale behind these standards and will consider recent developments in standard-setting at
various occasions.
2. Prior knowledge
Before entering this course, students are expected to have completed an introductory and
intermediate financial accounting course. At Maastricht University, these courses are the first-year
bachelor accounting courses (EBC1037-EBC1039-EBC1039 Accounting and Financial Reporting)
and the third-year bachelor course Intermediate Financial Accounting (EBC2056). In these
courses, the basic principles of accrual accounting, the recognition of transactions, and the
measurement and recognition rules for various assets and liabilities are discussed. The current
course heavily relies on knowledge of these topics. All students are therefore advised to refresh
their accounting knowledge during the first two weeks of the course.
If you feel the need to recap your prior accounting knowledge, you can have a look at the following
textbooks:
➢ Kieso, Weygandt & Warfield, Intermediate Accounting IFRS edition, Wiley (most recent
edition).
➢ Weygandt, Kimmel & Kieso, Financial Accounting with IFRS, Wiley (most recent edition).
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3. Literature
The required textbook used for this course is:
R. Picker, K. Clark, J. Dunn, D. Kolitz, G. Livne, J. Loftus, and L. van der Tas, Applying
IFRS Standards, fourth edition, 2016, Wiley.
An additional text on consolidation has been added to the student portal. This text is meant as
additional clarification to the textbook. The text is not a part of the required literature.
3
4. Course coordination
Dr. Annelies Renders is the coordinator for this course. If necessary, she can be consulted, but it
is advised to contact your tutor first.
Email Room number
Annelies Renders a.renders@maastrichtuniversity.nl B2.11
5. Organization of the course

The course Advanced Financial Accounting consists of 12 tutorial meetings (11 meetings for part-
time students, due to the CDD). In addition, a number of lecture videos will be uploaded on the
course page where the theory of the topics discussed in the tutorials will be explained.
An oversight of the course organization and the topics covered are listed in the schedule below.
Further details about the meeting materials can be found in section 8 of this course manual. You
are required to prepare individually for each meeting by reading the required literature and
preparing the indicated.
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5.1. Schedule for regular students

Week/Meeting Date Topic
Meeting 1 31 Jan Introduction and Conceptual Framework

I
Meeting 2 2 Feb Revenue Recognition
Meeting 3 7 Feb Income Taxes (1)

II
Meeting 4 9 Feb Income Taxes (2)
Meeting 5 14 Feb Consolidation: Business Combinations
III Consolidation: Wholly Owned Subsidiaries &

Meeting 6 16 Feb
Intragroup Transactions
Meeting 7 21 Feb Consolidation: Non-Controlling Interests

IV
Meeting 8 23 Feb Consolidation Case
CARNIVAL BREAK (EXAM PREPARATION TIME)
Meeting 9 7 Mar Q&A for exam

V
9 Mar NO MEETING - CDD
Meeting 10 14 Mar Earnings Quality

VI
Meeting 11 16 Mar !! EXAM Consolidation & Income Taxes !!
NO MEETING – Preparation time

21 Mar
VII Assignment 3
Meeting 12 23 Mar Presentations Assignment 3
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5.2. Schedule for part-time students

The topics that are covered during the meeting on Friday are indicated in the schedule below.
Week/Meeting Date Topic
Introduction and Conceptual Framework

I Meeting 1&2 4 Feb
Revenue Recognition
Income Taxes (1)

II Meeting 3&4 11 Feb
Income Taxes (2)
Consolidation: Business Combinations
III Meeting 5&6 18 Feb Consolidation: Wholly Owned Subsidiaries &

Intragroup Transactions
Consolidation: Non-Controlling Interests

IV Meeting 7&8 25 Feb
Consolidation Case
CARNIVAL BREAK (EXAM PREPARATION TIME)
NO MEETING - CDD
V
Q&A for exam via email
Meeting 10&11 18 Mar !! EXAM Consolidation & Income Taxes !!

VI
Earnings Quality
VII Meeting 12 25 Mar Presentations Assignment 3
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6. Assessment and grading

The grade for this course will be based on the following criteria:
▪ Participation: 10%
▪ Group Assignments: 40% (10% per assignment + 10% for presentation of last assignment)
▪ Grade on closed-book exam: 50%
6.1. Participation
Participation will be graded on a scale between 0 and 10. We expect students to be present during
the tutorials and to actively participate in the discussions. This participation grade will count for
10% of the final grade
6.2. Group Assignments

Students will have to do some group work during the course. In total there will be 3 group
assignments, which will have to be solved in a group of 3 to 4 students and handed in via the
course page. Details about the group assignments as well as the deadlines will be communicated
via the course page on Canvas. The third group assignment will have to be presented during the
last tutorial. These group assignments are graded (including the presentation of the last assignment)
and will count for 40% of the final grade
6.3. Closed-book Exam

There will be a written closed-book exam with open questions. The exam will consist of questions
about income taxes and consolidation only. The exam grade will count for 50% of the final grade.
Students can only use a non-programmable calculator during the exam. Only the following types
are allowed: Casio FX82 and Casio FX85 (and their subtypes, like FX82 ES).
The exam duration is two hours.
6.4. Final Grade

To pass this course, the unrounded weighted average grade across the grading components should
equal to at least 5.50. In addition, to pass the course, you need to obtain minimum 5.5 on the exam.
Partial grades are valid this and the next two academic years. The final course grade is computed
according to the percentages disclosed at the beginning of this section and is rounded to the nearest
half, with the exception of course grades between 5.25 and 5.49: these are rounded to 5.00.
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In line with grading instructions from the Exams Office, a NG ("No Grade") indication will be
assigned to students that do not take part in the course and/or exam components.
6.5. Re-sit
Note that re-sit possibilities are only offered for the final written examination. Note that you have
to register yourself for the resit. The resit will take place during the resit exam week after period 5
and the exam will take 2 hours. The resit exam will also only focus on consolidation and income
taxes, similar to the first sit exam.
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7. Code of Conduct
“I expect the coordinators, tutors, and students in this and other Accounting & Information Management courses
to behave in a manner that is suited in general and for an academic institution in particular. I emphasize fairness
to all students taking the course. Please do not do anything that is unfair to other students, or ask the
coordinator/tutor to make exceptions that are unfair to other students. In addition, do not perform activities that
have the effect or intention of interfering with education or fair evaluation of a student’s performance. Examples of
such activities include, but are not limited to:
1. Cheating: behaving in a dishonest or deceitful way in order to win an advantage.

2. Plagiarism: copying another person’s work, ideas, etc. and submitting it as your own or without attribution.
3. Fabrication: using fictitious data and results with the sole purpose to deceive.
4. Misrepresentation of records: tampering and falsifying information, for example on one’s resume.
5. Facilitating dishonesty: knowingly helping or attempting to help another violate any of the above provisions.
Furthermore, in communicating with the academic staff and fellow students, you are expected to behave in a courteous
way, i.e., you are expected to show good manners and respect for others. You are especially advised to take this into
account in your email communication. The mere fact that the development in information technology has made it
possible to send an email within a split second does not mean that you should do so. Think twice before you send an
email!
Adhering to the above code of conduct ensures that we can all focus on the fundamental purpose of an academic
institution, which is the pursuit of knowledge.”
Prof. Dr. Alexander Brüggen

Chair of the Department of Accounting & Information Management
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8. Meetings
The readings, assignments, and cases that will be discussed in each meeting are listed below. The
chapters and part of the assignments have been extracted from the textbook mentioned earlier.
You are required to prepare for each meeting by studying the indicated readings, watching the
videos, and preparing the assignments in writing. Note that this implies that you are required to
prepare for the first meeting in advance of that meeting.
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Meeting 1: Introduction and Conceptual Framework
Readings
▪ Chapter 1
Assignments
Assignment 1.1. INTRODUCTION TO THE COURSE & EACH OTHER
Carefully read the syllabus and write down any questions you have with regard to the content
and the requirements of this course. Feel free to ask your tutor the questions that you wrote
down.
Assignment 1.2. THE INFORMATION GAME

Carefully read the instructions for the information game that are posted under Module 1. Make
sure that you also bring some small cash (in euros) to class.
Assignment 1.3. MC QUESTIONS ABOUT CONCEPTUAL FRAMEWORK

Answer the following multiple-choice questions about the Conceptual Framework.
1. The purpose of the Conceptual Framework is:
A. To assist the International Accounting Standards Board to develop IFRS Standards.
B. To assist preparers of IFRS financial statements to develop consistent accounting policies
when no IFRS Standard applies to a particular transaction or other event, or when a Standard
allows a choice of accounting policy.
C. To assist all parties to understand and interpret IFRS Standards.
D. All of the above
2. The Conceptual Framework can override requirements in a Standard.

A. True
B. False
3. The objective of general-purpose financial reporting as described in the Conceptual Framework

is to:
A. Provide information to regulators
B. Support the entity's tax return
C. Meet the information needs of an entity's stakeholders.
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D. Provide financial information about the reporting entity that is useful to existing and potential
investors, lenders and other creditors in making decisions relating to providing resources to the
entity.
4. The fundamental qualitative characteristics of useful financial information are:

A. Comparability and relevance
B. Relevance and reliability
C. Relevance, reliability and comparability
D. Relevance and faithful representation
E. Comparability, relevance and faithful representation
5. For information to be relevant, it has to possess:

A. Only predictive value
B. Only confirmative value
C. Both predictive and confirmatory value
D. Either predictive or confirmatory value, or both
6. A trade-off between the fundamental qualitative characteristics of relevance and faithful

representation may need to be made in order to meet the objective of financial reporting.
A. True
B. False
7. The Conceptual Framework defines a liability as:

A. A present obligation of the entity to transfer an economic resource as a result of past events
B. A present obligation of the entity arising from past events, the settlement of which is expected
to result in an outflow from the entity of resources embodying economic benefits
C. An amount the entity may have to pay after the end of the reporting period
D. None of the above
8. Recognition is the process of:

A. Capturing, for inclusion in the statement of financial position or the statement(s) of financial
performance, an item that meets the definition of one of the elements of the financial statements—
an asset, a liability, equity, income or expenses
B. Determining where an item should be presented in the financial statements
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C. Sorting assets, liabilities, equity, income or expenses on the basis of shared characteristics
D. Adding together of assets, liabilities, equity, income or expenses that have shared characteristics
9. Some items that do NOT meet the definition of an asset, a liability or equity may be recognised
in the statement of financial position.
A. True
B. False
10. The assumption that a company will continue to operate for the foreseeable future is called:
A. The accrual basis principle
B. The comparability principle
C. The going concern principle
D. The timeliness principle
Assignment 1.4. RECOGNISING A LOSS FROM A LAWSUIT

Solve exercise 1.2 on page 15 of the textbook.
Assignment 1.5. PURCHASE ORDERS

Assignment 1.6. DEFINITIONS ELEMENTS & RECOGNITION CRITERIA

Assignment 1.7. ASSETS

At the end of the tutorial, your tutor will also form teams of 3 to 4 students for the hand-in
assignments.
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Meeting 2: Revenue Recognition
Readings
▪ Chapter 4
Assignment 2.1. MEASUREMENT

Assignment 2.2. PURCHASE ORDERS

Assignment 2.3. REVENUE RECOGNITION

Company A provides a bundled service offering to Customer B. It charges Customer B $38,000
for initial connection to its network and two ongoing services — access to the network for 1 year
and ‘on-call trouble-shooting’ advice for that year.
Customer B pays the $38 000 upfront, on 1 July 2015. Company A determines that, if it were to
charge a separate fee for each service if sold separately, the fee would be:
Connection fee $ 6,000

Access fee $ 13,000
Troubleshooting $ 24,000
The end of Company A’s reporting period is 30 June.
Prepare the journal entries to record this transaction in accordance with IFRS 15 for the year ended
30 June 2016, assuming Company A applies the relative fair value approach. Show all the workings.
Assignment 2.4. GROUPON CASE

Carefully read the case “Growing Pains at Groupon” and answer the questions below.
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Growing Pains at Groupon: Case Questions

1. “Revenue and revenue growth are more important than income and income growth for
new businesses, especially in the new-age economy.” Do you agree with this statement?
2. In the months leading up to Groupon’s IPO, the SEC posed several questions regarding
Groupon’s choice of accounting principles for revenue recognition.
a. Compare the amount of revenue reported in the original and amended S-1s.
What caused the difference?
b. Which of the two amounts do you think Groupon preferred? Why?
c. In correspondence with the SEC following its initial S-1 filing, how did Groupon
justify its method of reporting revenue?
d. With reference to the criteria listed in ASC 605-45-45 (see Appendix below),
which of Groupon’s arguments were weak, and why?
3. Groupon had recognized revenue for the sale of high-ticket items in late 2011.
Purchasers of the Groupons have a right of return, as specified in the “Groupon Promise”,
prominently featured on its website.
a. Do you agree with Groupon’s accounting? Why or why not?
b. What could Groupon have done differently, and how would the financial
statements have been affected?
4. Groupon’s restatement of 2011 fourth-quarter financials resulted in a reduction of $14.3
million of revenues and a decrease of $30 million of operating income. However, its operating
cash flows was unaffected. Explain how this is possible.
5. The refund reserve amount for Groupon as of December 31, 2011 was $67.45 million
and on March 31, 2012 had increased to $81.56 million. Assume that the accrued expense for
refund reserve was $100 million for the first quarter of 2012.
a. How much refund was issued in 2012?
b. Explain why the expense recorded in the first quarter does not equal the amount
paid during the quarter.
6. In its initial S-1 filing, Groupon presented a non-GAAP performance metric called
ACSOI. It was subsequently removed after the SEC objected. For more information on non-
GAAP measures, read the short pdf on non-GAAP measures posted on the course page.
a. What are non-GAAP performance metrics and why do companies use them?
b. Why did the SEC question the inclusion of ACSOI in Groupon’s financial
statements?
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c. Do you agree with Groupon’s contention that discretionary expenses, such as marketing
expenses, should be excluded from the measures of a company’s financial performance?
7. In your opinion, do the problems with Groupon’s choice of accounting methods, use of
a non-GAAP metric, and material weakness in its internal control reflect a lack of management
experience or a lack of management integrity?
Appendix:
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Meeting 3: Income Taxes (1)
Readings
▪ Chapter 6
Assignments
Assignment 3.1. CREATION AND REVERSAL OF TEMPORARY DIFFERENCES
The following are all independent situations. Prepare the journal entries for deferred tax on the
creation or reversal of any temporary differences. Explain in each case the nature of the temporary
difference. Assume a tax rate of 30%.
1. The entity has an allowance for doubtful debts of £10,000 at the end of the current year
relating to accounts receivable of £125,000. The prior year balances for these accounts were
£8,500 and £97,500 respectively. During the current year, debts worth £9,250 were written
off as uncollectable.
2. The entity sold a vehicle at the end of the current year for £15,000. The vehicle cost £100,000
when purchased 3 years ago and had a carrying amount of £25,000 when sold. The taxation
depreciation rate for equipment of this type is 33%.
3. The entity has recognised an interest receivable asset with a beginning balance of £17,000 and
an ending balance of £19,500 for the current year. During the year, interest of £127,000 was
received in cash.
4. At the end of the current year, the entity has recognised a liability of £4,000 in respect of
outstanding fines for non-compliance with safety legislation. Such fines are not tax-deductible
Assignment 3.2. CURRENT AND DEFERRED TAX WITH PRIOR YEAR LOSSES
The accounting profit before tax of Gardenia Ltd was £175,900. It included the following revenue
and expense items:
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The draft statement of financial position as at 30 June 2013 included the following assets and
liabilities:
Additional information
(a) The tax depreciation rate for plant is 10% p.a., straight-line.
(b) The tax rate is 30%.
(c) The company has £15,000 in tax losses carried forward from the previous year. A deferred tax
asset was recognized for these losses. Taxation legislation allows such losses to be offset against
future taxable profit.
Calculate the income tax expense, current tax liability, and changes in the deferred tax assets and
liabilities for the year ended 30 June 2013.
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Assignment 3.3. ACCOUNTING FOR TAX LOSSES

Assume company Y has been consistently profitable until 2014 when, as a result of a fall in
revenues and a large restructuring charge, it reported a before-tax loss of 100 in its published
accounts. Below is an overview of the taxable and deductible temporary differences. Taxable
temporary differences are attributable largely to differences in the book and tax treatments of
depreciation and profits on long-term contracts. Most of the deductible difference in 2014 is
attributable to the restructuring charge. There are no permanent differences. The corporate tax
rate is 40%.
2013 2014
Accounting profit (loss) 350 (100)
End-year temporary differences:
Taxable 190 270
Deductible 25 150
What is the income tax expense company Y will recognize in 2014, assuming:
(a) It can carry tax losses forward but not back.
(b) It can carry tax losses back (one year only) as well as carry them forward. You can
assume here that the company made sufficient profits in the year before so that it is allowed
to carry the tax losses back for one year.
For both scenarios, determine the amounts of deferred tax asset and deferred tax liability that
need to be recorded on the balance sheet at year-end.
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Meeting 4: Income Taxes (2)
Readings
▪ Chapter 6
Assignments
Assignment 4.1. CREATION AND REVERSAL OF TEMPORARY DIFFERENCE
Delirium Inc. purchased a machine on July 1, 2015 at a cost of £40,000. The expected economic
life is 5 years, and the machine will be depreciated on a straight-line basis. The depreciation rate
for taxation is 15% p.a. straight-line. On June 30th 2017, Delirium Inc. shortened the economic life
of the machine from three to two years. The depreciation charge has been adjusted accordingly.
The equipment was sold on 30 June 2018 for £25,000. The company tax rate is 30%.
For each of the years ended 30 June 2016, 2017, and 2018, calculate the carrying amount and the
tax base of the asset and determine the appropriate deferred tax entry. Explain your answer.
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Assignment 4.2. CURRENT AND DEFERRED TAX
Assignment 4.3. STARBUCKS: SOCIAL RESPONSIBILTY AND TAX AVOIDANCE

Read the case “Starbucks: Social Responsibility and Tax Avoidance” and answer the questions 1-
10 on pages 51 and 52.
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Meeting 5: Business Combinations
Readings
▪ Chapter 14 (excluding 14.7.2)
▪ Chapter 20
Assignments
Assignment 5.1. CONTROL IN BUSINESS COMBINATIONS
Iron Ltd. has acquired, during the current year, the following investments:
Maiden Ltd. €140,000 (35% of issued capital)
Curtain Ltd. €120,000 (35% of issued capital)
Iron Ltd. is concerned that it may need to prepare consolidated financial statements under IFRS
10. The following information is available regarding the acquired firms.
Maiden Ltd.
• The remaining shares of Maiden Ltd. are owned by a diverse group of investors,
each holding only a small stake in Maiden Inc.
• Attendance at the annual meeting of shareholders is very low. Only a handful of
shareholders show up, and even fewer ask questions.
• The board of directors consists of five directors, three of which will be nominated
by Iron Ltd., and all of which are likely to be appointed.
Curtain Ltd.
• The remaining shares of Curtain Ltd. are owned by a small group of investors,
who each own about 15% of shares. One of these investors is Maiden Inc., who
owns 17%.
• Attendance at the annual meeting of shareholders is high, and shareholders are
active in asking questions and challenging management.
• Two of the shareholders, including Maiden Ltd, have representatives on the
board of directors, and are planning to nominate these directors for re-election.
1. Advise Iron Ltd as to whether, under IFRS 10, it controls Maiden Ltd and/or Curtain Ltd.
Support your conclusion.
2. Would your conclusion be different if the remaining shares in Maiden Ltd were owned by
three institutional investors each holding 20%? If so, why?
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Assignment 5.2. LESS THAN MAJORITY OWNERSHIP

On April 1st, Ihl Inc. acquired 45% of the shares of Deviv’e Inc. As each share equals one vote,
Ihl Inc. possesses 45% of shareholder votes. All other shares are dispersed across a large number
of shareholders, and no blockholders exist. Over the prior years, attendance at shareholder
meetings was incomplete, and only about 65% of total shareholder votes are represented and cast
at the annual meetings. The board of directors is discussing whether it should include Deviv’e Inc.
as a subsidiary in its financial statements, as management argues that no conclusive evidence exists
that Ihl Inc. can control the financial and operating policies of Deviv’e Inc.
Provide a report to Ihl Inc. on whether it should regard Deviv’e Inc. as a subsidiary in its
preparation of consolidated financial statements at 31 December 2015.
Assignment 5.3. ACQUISITION OF TWO BUSINESSES

Examine the financial information of exercise 14.10 of the textbook on pages 412-413. Answer
the following questions (not the questions in the textbook!):
1. Prepare the acquisition analysis for the acquisition transactions of Queenfish Ltd.
2. Prepare the journal entries for the acquisition transactions in the records of Queenfish Ltd.
and Hoklo Ltd.
Assignment 5.4. DISCUSSION & FEEDBACK OF ASSIGNMENT 1

Bring your solutions of Assignment 1 to class to discuss the case in class.
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Meeting 6: Wholly owned subsidiaries and intragroup transactions
Readings
▪ Chapter 21
▪ Chapter 22
Assignments
Assignment 6.1. WHOLLY OWNED SUBSIDIARIES
Auriga Ltd gained control of Perseus Ltd by acquiring all its shares on 1 July 2013, for a total price
of £160,000. The equity at that date was:
Share capital £100 000
Retained earnings 35 000
At 1 July 2013, all the identifiable assets and liabilities of Perseus Ltd were recorded at fair value,
except for:
Additional information
a) The inventory was all sold by 30 June 2014.
b) The plant had a further 5-year life but was sold on 1 January 2016 for £50 000. The land
was sold in March 2014 for £150 000.
c) Where revalued assets are sold or fully consumed, any associated amounts in the business
combination valuation reserve are transferred to retained earnings.
d) At 1 July 2013, Perseus Ltd had guaranteed a loan taken out by Swede Ltd. Perseus Ltd
had not raised a liability in relation to the guarantee but, as Swede Ltd was not performing
well, Auriga Ltd valued the contingent liability at £5000. In January 2016, Swede Ltd repaid
the loan.
e) Some time ago, Perseus Ltd had also invented a special tool and patented the process. No
asset was raised by Perseus Ltd, but Auriga Ltd valued the patent at £6000, with an
expected useful life of 6 years.
f) In March 2016, Perseus transfers 20,000 to its general reserve. The transfer to general
reserve during the year ended 30 June 2016 was from profits earned before 1 July 2013.
g) The tax rate is 30%.
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Prepare the consolidation adjustment journal entries for 30 June 2016.
For completeness, financial information for both companies for the year ended 30 June 2016 is
reported as follows:
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Assignment 6.2. INTRA-GROUP TRANSACTIONS

Examine the financial information of exercise 22.9 of the textbook on pages 631-632. Prepare the
consolidation adjustment journal entries for 30 June 2016.
Note: For intragroup transactions, ignore the sentence that the profit in ending inventory includes
$50 from previous period sales.
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Meeting 7: Non-Controlling Interest
Readings
▪ Chapter 20
▪ Chapter 21
▪ Chapter 22
▪ Chapter 23
Assignments
Assignment 7.1. CONSOLIDATION WORKSHEET, REVALUATION IN
SUBSIDIARY’S RECORDS, PARTIAL GOODWILL METHOD
On 1 July 2016, Gabby Ltd acquired 80% of the share capital of Moon Ltd for $198,000. At this
date, the equity of Moon Ltd consisted of:
Share capital $150,000
General reserve 30,000
Retained earnings 20,000
At 1 July 2016, all the identifiable assets and liabilities of Moon Ltd were recorded at fair value
except for the following assets:
The plant had a further 5-year life, with benefits expected to be received evenly over that period.
The land was sold by Moon Ltd in January 2018 for $150,000. Moon Ltd had revalued both these
assets in its records at 1 July 2016. Gabby Ltd uses the partial goodwill method.
Financial information for these two companies at 30 June 2018 included:
(see next page)
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Additional information:
(a) In the 2016–17 period, Moon Ltd transferred $10,000 from the general reserve to retained
earnings. No other transfers to or from reserves took place in that period. In the 2017–18 period,
the transfer from asset revaluation surplus is as a result of Moon Ltd’s selling of the land on hand
at 1 July 2016. The transfer to general reserve is from post-acquisition profits. The balance of
Moon Ltd’s asset revaluation surplus at 1 July 2017 was $50,000, with an increase of $5,000
recognized at 30 June 2018.
(b) During the 2016–17 period, Moon Ltd sold some inventory to Gabby Ltd for $8,000. This had
originally cost Moon Ltd $6,000. At 30 June 2017, 10% of these goods remained unsold by Gabby
Ltd.
(c) The ending inventory of Gabby Ltd included inventory sold to it by Moon Ltd at a profit of
$3,000 before tax. This had cost Moon Ltd $32,000.
(d) On 1 January 2017, Moon Ltd sold an item of inventory to Gabby Ltd for $50,000. This had
originally cost Moon Ltd $40,000. Gabby Ltd uses the item as a non-current asset (plant) and
depreciates it on a straight-line basis over a 5-year period.
(e) The tax rate is 30%.
Required
Prepare the consolidation worksheet entries that serve as inputs for the consolidated financial
statements of Gabby Ltd at 30 June 2018.
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Assignment 7.2 CONSOLIDATION WORKSHEET, CONSOLIDATED FINANCIAL

STATEMENTS, FULL GOODWILL METHOD
Financial information of Spider Ltd and its subsidiary company, Bird Ltd, at 30 June 2016 are
shown on the next page. At 1 July 2013, the date Spider Ltd acquired its 80% shareholding in Bird
Ltd, all the identifiable assets and liabilities of Bird Ltd were at fair value except for the following
assets:
The plant has an expected life of 10 years, with benefits being received evenly over that period.
Differences between carrying amounts and fair values are adjusted on consolidation. The land on
hand at 1 July 2013 was sold on 1 February 2014 for $40,000. Any valuation reserve in relation to
the land is transferred to retained earnings on consolidation. Spider Ltd uses the full goodwill
method. The fair value of the non-controlling interest at 1 July 2013 was $31,500.
Additional information:
(a) At acquisition date, when Spider Ltd acquired 80% of Bird’s shares, the equity of Bird Ltd
was:
Share capital (100,000 shares) $100,000
General reserve 3,000
Retained earnings 37,000
(b) Inventory on hand of Bird Ltd at 1 July 2015 included a quantity priced at $10,000 that had
been sold to Bird Ltd by its parent. This inventory had cost Spider Ltd $7,500. It was all sold by
Bird Ltd during the year.
(c) Spider Ltd’s inventory at 30 June 2016 included items sold to it by Bird Ltd at $5,000 above
cost.
(d) During the year, intragroup sales by Bird Ltd to Spider Ltd were $60,000.
(e) It was also learned that Bird Ltd had sold to Spider Ltd an item from its inventory for $20,000
on 1 January 2015. Spider Ltd had treated this item as an addition to its plant and machinery. The
item was put into service as soon as received by Spider Ltd and depreciation charged at 20% p.a.
The item had been fully imported by Bird Ltd at a cost of $15,000.
(f) Management and consulting fees derived by Spider Ltd were all from Bird Ltd and represented
charges made for administration $2,200 and technical services $2,800. The latter were charged by
Bird Ltd to manufacturing expenses.
(g) All debentures issued by Bird Ltd are held by Spider Ltd.
29
(h) Other components of equity relate to movements in the fair values of the financial assets. The
balance of this account at 1 July 2015 was $10,000 (Spider Ltd) and $8,000 (Bird Ltd).
(i) The tax rate is 30%.
Required
Prepare the consolidation worksheet entries that serve as inputs for the consolidated financial
statements for Spider Ltd and its subsidiary, Bird Ltd, for the year ended 30 June 2016.
30
Meeting 8: Consolidation Case
Readings
▪ Chapter 20
▪ Chapter 21
▪ Chapter 22
▪ Chapter 23
Assignments
Assignment 8.1. CONSOLIDATION CASE: R&D ENTITIES
Read the case “R&D Entities: Is Control Possible without Owning a Single Share of Stock?” and
answer the requirements of Part I, II and III. You can ignore the requirements that have been
deleted. Please solve the case based on the IFRS standards as we discussed them in class. You
can ignore references to US GAAP in the case, as US GAAP is fairly similar to IFRS.
Assignment 8.2. DISCUSSION & FEEDBACK OF ASSIGNMENT 2

Bring your solutions of Assignment 2 to class to discuss the case in class.
31
Meeting 9: Q&A Session before the exam
Readings
▪ Chapter 6
▪ Chapter 20
▪ Chapter 21
▪ Chapter 22
▪ Chapter 23
▪ All exercises discussed during the income taxes and consolidation tutorials
If you still have questions about income taxes or consolidation, now you can still ask them. For
the part-time students, the Q&A will be via email, as there is no tutorial scheduled this week due
to the CDD.
32
Meeting 10: Earnings Quality
Will be updated later
33
Meeting 11: Exam on Consolidation and Income Taxes
!! During this tutorial you will make an exam on the topics of consolidation and income
taxes !!
The exam will take 2 hours.
It is a closed-book exam with open questions.
The exam counts for 50% of the final grade.
You need to obtain a score of 5.5 on the exam in order to pass the course.
Students can only use a non-programmable calculator during the exam. Only the following types
are allowed: Casio FX82 and Casio FX85 (and their subtypes, like FX82 ES).
34
Meeting 12: Presentations Group Assignment 3
Assignment 12.1. PRESENTATIONS GROUP ASSIGNMENT 3
More information will follow later. Please refer to the module Meeting 12 on Canvas.
35

Course Syllabus EBC4074 Advanced Financial Accounting Period 4 Academic Year 2021/2022

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Course Syllabus EBC4074 Advanced Financial Accounting Period 4 Academic Year 2021/2022

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Course Syllabus

Advanced Financial Accounting

© 2022 Maastricht University

2. Prior knowledge ...................................................................................................................................... 2

4. Course coordination ............................................................................................................................... 4

5. Organization of the course .................................................................................................................... 4

5.1. Schedule for regular students ............................................................................................................. 5

5.2. Schedule for part-time students......................................................................................................... 6

6. Assessment and grading......................................................................................................................... 7

6.1. Participation ......................................................................................................................................... 7

6.2. Group Assignments ............................................................................................................................ 7

6.3. Closed-book Exam .............................................................................................................................. 7

7. Code of Conduct .................................................................................................................................... 9

Meeting 1: Introduction and Conceptual Framework ......................................................................... 11

Meeting 2: Revenue Recognition ............................................................................................................ 14

Meeting 3: Income Taxes (1) ................................................................................................................... 17

Meeting 4: Income Taxes (2) ................................................................................................................... 20

Meeting 5: Business Combinations ........................................................................................................ 22

Meeting 6: Wholly owned subsidiaries and intragroup transactions ................................................. 24

Meeting 7: Non-Controlling Interest ..................................................................................................... 27

Meeting 8: Consolidation Case ............................................................................................................... 31

Meeting 9: Q&A Session before the exam ............................................................................................ 32

Meeting 10: Earnings Quality .................................................................................................................. 33

Meeting 11: Exam on Consolidation and Income Taxes .................................................................... 34

Meeting 12: Presentations Group Assignment 3 ................................................................................. 35

5. Organization of the course

5.1. Schedule for regular students

Meeting 1 31 Jan Introduction and Conceptual Framework

Meeting 3 7 Feb Income Taxes (1)

Meeting 5 14 Feb Consolidation: Business Combinations

III Consolidation: Wholly Owned Subsidiaries &

Meeting 7 21 Feb Consolidation: Non-Controlling Interests

CARNIVAL BREAK (EXAM PREPARATION TIME)

Meeting 9 7 Mar Q&A for exam

Meeting 10 14 Mar Earnings Quality

NO MEETING – Preparation time

Meeting 12 23 Mar Presentations Assignment 3

5.2. Schedule for part-time students

Week/Meeting Date Topic

Introduction and Conceptual Framework

Income Taxes (1)

Consolidation: Business Combinations

III Meeting 5&6 18 Feb Consolidation: Wholly Owned Subsidiaries &

Consolidation: Non-Controlling Interests

CARNIVAL BREAK (EXAM PREPARATION TIME)

Meeting 10&11 18 Mar !! EXAM Consolidation & Income Taxes !!

VII Meeting 12 25 Mar Presentations Assignment 3

6. Assessment and grading

6.2. Group Assignments

6.3. Closed-book Exam

The exam duration is two hours.

6.4. Final Grade

1. Cheating: behaving in a dishonest or deceitful way in order to win an advantage.

Prof. Dr. Alexander Brüggen

Meeting 1: Introduction and Conceptual Framework

Assignment 1.2. THE INFORMATION GAME

Assignment 1.3. MC QUESTIONS ABOUT CONCEPTUAL FRAMEWORK

2. The Conceptual Framework can override requirements in a Standard.

3. The objective of general-purpose financial reporting as described in the Conceptual Framework

4. The fundamental qualitative characteristics of useful financial information are:

5. For information to be relevant, it has to possess:

6. A trade-off between the fundamental qualitative characteristics of relevance and faithful

7. The Conceptual Framework defines a liability as: