Day1GnslatiI .

Consolidation Basics

When One
Company Acquires Another Company ,
It acquires Net Assets of other
company -

Parent
P.co
70-1 .

+
S.co
Subsidiary
→
Normally control comes with 501 .
+ shares
→ P.co
buys Running Business of S.co thats why Pay Goodwill .

•
Whenever we do
accounting we treat complete group as a
single Entity (↳
100%
Required .
Consolidated SOFP
Eg .
P.co 's SOFP S.co 's SOFP
Assets
Assets Assets VCA (10+10) 20,000
NCA 10,000 NCA 10,000 Current Assets (5+5) 10,000
Investment ins.co 5000 C- A 5000 30,000
5000 Shares 5000
Current Assets 5000 Equities & Liabilities

20,000 '
OSC 10,000

liabilities (10+10) 20,000

Equities & Liabilities Equities & Liabilities 30,000

O S C - -

10,000 0 S.c
-

@ $1 5000
liabilities 10,000 liabilities 10,000
20,000 15,000
 Proportionate Method :

*$ *
I Jan 016 31 Dec 017
g.gg
.

f.bg.

Acquisition Date 'Ve eportingdatenlel-Asselsofs.CO

OSC
;
10,000
/
OSC 10,000 !
Premium
R E
-
10,000% -
Premium
RE
5000

30,000
/
/

20,000 45
%¥p
Cost of Investment 40000¢ NCI Consolidated Reserve
less : Fair Value Of Net S.co 's Net Asset at Acey P.co 's end R E XXX
year
-

Assets of S.CO (20000) date (25000×201) 5000 S.co 's RE

post
250001585%
-
- - r - Add :S CO's Post RE
- 20000×801 .
16000

Goodwill 20,000 20000×201 . 4000 ✗✗✗

☒% NCI 9000

Tell Goodwill Method

P.co
807
Acqdali Reporting date
COI ( 80%) 40000180%1
.

Fair Value Nclatncqdate 10,000 ( 20%) s.CO OSC 10000 ←10000

50,000 400%7 RE 10000 RE 30000
less Fair Value of-N.Aofs.CO
: ( 20000 ) - •

-100% 20000 40000

Goodwill 30,000 Goof) . S.co 's
PostP-
20000

→ In Full Goodwill method NCI is Reported at Fair value .

-
Fair value of NCI at Acqdalé 10,000

Add :S .co 's Post RE 20000×201 . 4000

14000
 A Reporting date
OSC 10000 OSC 10000

RE 10000 RE 40000

Exp ( tooo)
,
20000
S.CO 's Post
[ RE
-29ohm -4¥
u

Inter Company Sales of Inventory

P → s
not sold
cost 200 3rd Party
-_

P.CO Sales
,,
P.co PGL
>
g.
Sales 500 cost 500

cost 200 NRB ( 300)

300 200

↳ P.Co'sP c. R
↳ P.CO 's RE xxx

less : URP (300 )

Aaa

•
Step / P→s)
CR and
URP is deducted From
group inventory

foreg .

cost
Family
1 Iac sisrubhan
1 crore

Sir

Mustafa
 • S → P

COS -1=200

S.co's PGL S.CO Not sold to

500 3rd Party

sales Sales P.CO
soo cost 500
Cost (200) URP ( 300)
300 200

• Step (s → P )
URP is deducted from S.co 's Reporting Date Net Assets and Group
Inventory .

Cost = 200

P.CO Sales = 1000 Total Profit =

800×70-1 .

3° " 560 → URP .

S.co
sort
-

>◦ %

• P→S Inter Company Sale of NCA

step P → s

① URP is deducted from C- R and

group plant
Excess dep will be added in S.co 's date Net Assets and Group Plant
② reporting .
.

Steps → p

① URP is deducted from S co 's

-

Reporting date Net Assets and

group plant
.

② Excess Dep will be added in C. R and

group plant
.

for NBV -100

-

eg sold for
P.co 1500
remaining life = 10
years
dep 150
15,00¥
URP = 500 S.co =
=

deep
group plant
1,0¥
= = too .

Extra #
 Types of Consideration ÷d
It gives consideration to S.co 's SH
When P.co buys S.co .

controlling .

7. Co
S.co 's
controlling SH

s.co

① Cash Consideration

Investment ✗✗ ✗

Cash xxx

② Shares Consideration

Investment xxx

OSC xxx

share Premium ✗xx

③ Loan Notes Consideration

Investment ✗✗ ✗

Loan Notes ✗ xx

④ Fixed Asset Consideration

Land C- V 3m
Investment 5
F.v = 5m Land 3

PGL 2

⑤ Deffered Consideration
↳ unconditional Promise to Pay cash in Future

Steps
Confute
cash
Present
flows and
Value
make
Of future
entry
Investment ✗✗ ✗

Deff consideration xxx

 ② Compute unwinding 0 Wint -
_

PV 1000 , , ,,
foreg
=
.

I Jan 016 1st Jan 017

Investment 1000 Int EXP / CR 100

¢
•

Deff cons . 1000 Deff cons . 100

⑥ Contingent consideration unwinding

discount
.

↳ Conditional Promise to Pay cash

→
contingent consideration must be recorded as its fair value at Acquisition date

Future fair value adjusted

→
changes are in
c
F.✓ = 1000 F- V-700
for
eg
.

1 Tan 08 31 Dec 08

Investment 1000 Contingent cons .

300
contingent cons .
1000 PGL / C R -

300
 / Jan 016 31 Dec 016

Acgdalé Net Assets ofs.co

Reporting date of Net Assets ofs.CO

OSC 5000
RE 2000 RE 10000
F. V. A land F. V. A land zoo .

'

900g AN ✓
'

g.
COI 20,000 1420001%2000
less : Fair value of ( A L = -

Net Assets ofs.co ( 9000)

Goodwill S.co 's land Book Value 4000 ✓
11,000 =

20000
F. V
=④
Goodwill 7000 2000 3000
8000 Building Cash Inventory

Fair Value Adjustment ( Depreciating Asset)

I Janolb 31 Dec 16

• •
N A Reporting date N A
Acqdalé
-
-

DSC 10,000 OSC 10.000

RE 5000 dep 4000 RE 20,000

@608
-_

F.v. A Plant (4-000) loyrs F. v. A Plant

.

Plant -_ c. v 10AM '

Remaining life =
loyrs S.co 6000 =
@ 00) = 5400
Fair Value 60N
loyrs
'

1^4000
C= A
1^4000
-
L ) r

Group 10,000 = ( 1000) =

9000
10
 date Net Assets of S.CO , it S.co 's SOFP aswell
→
whatever amount is adjusted in
Reporting is also adjusted on Asset side of .

Sometimes when P.co Acquires S.co There are some

unrecognised Intangible Assets in S co 's Books Now P.co will
Recognize it for the
- -

→ .

purpose of consolidation .
This is also a sort of Fair Value Adjustment .

↑ ↑ P.co COI = 50,000

C = A L Branded
Goodwill
-

Ideas
Building Cash Inventory
S.co 15000 15000 5000 5000
10,000

ii.it "

Maori
 70%

go f
P.co S.co Consolidated SOCI
:
Sales IOOÉ 2000
- n
n /
"

-11200
COS ( 100 ) ) 300
T a igoo p✓ ↳◦◦

op
-

Exp 1200)T(300) 500

PAT 700 Profit 2200

÷
NCI =
S.co 's PA-i-x-3-o.FI#xx
1500×301 . = 450 .

Profits Attributable to

Equity owners ofp.co 1750£ ;

.z%i=
NCI

Profit

P→s (Inventory )
P.co Sales
Sales
500
s.co
1200
3rd Group point of view
Party
cost 500
Sales 1200
P.CO S.co C- 05 (200)
500 Consolidated SOCI
sales 1200
gp 1000
500
Cos 200
Sales (5001-1200-500) 1200
GP 300 700 C. 0.5 (200+500-500 + Urp) 120€
Gross
Profit 1000
 Steps P→ s

① Consolidated Sales & Cost of Sales will be Reduced

by the amount of Transaction .

① URP will be added in Consolidated co S -

steps s→ P
Inventory
① Consolidated Sales & Cost of Sales will be reduced
by the amount of Transactions .

① URP will be added in Consolidated C -

O 's

⑦ URP will be deducted from S -

co 's PAT in calculation of NCI .

N Breton .

P → S ( fixed Assets) P
. to
15N
'

Soldo
①

②
U RP

Excess
will be added
-

depreciation
in Consolidated C. o S

will be deducted from Consolidated

.
.

C O S -
- -
↳ Seo -

③ Excess depreciation will be added in S co 's -

PAT in the calculation of NCI .

S→P ( Fixed Assets)

① U RP will be added in Consolidated C -

O -

S .

① U RP will be deducted from S -

co 's PAT in the calculation of NCI .

③ Excess depreciation will be deducted from Consolidated C -

o S -
.
 NBV

P.CO sold 1500

URP 500
= S.co

GÑÉᵈ
S.co = 1501 = 150

¥'ᵗ⑨
105s

group =
1001 =
100

10
yrs

Excess depreciation ( upward FVA )

↓gg
① """ ᵈ """"°" "" be aᵈᵈeᵈ " " "" " "ᵈᵈᵗeᵈ " ˢ

② Excess depreciation will be deducted from S.co 's PAT in the calculation .

Of NCI .

e'
g S.co → F.V = 3000

Plant → C. V = 1000

Remaining life = 10
yrs
.

S.CO 's dep = 1000 100

=

µ
group dep
300

30,0¥
=
= .

Impairment of Goodwill ( Full G. w Method )

Consolidated
① Impairment of goodwill will be added in
operating expense
.

② Impairment of will be deducted PAT calculation NCI

goodwill from s.co 's in the
of .
Impairment of Goodwill (Proportionate Method)

→
Tinpairmentofgw will be added in Consolidated
Operating Expenses .

PV -1000
-

1100

1 ,
1 Jan 016 1 Jan 017

Int Exp 100 Investment 1000

10%
D. C 100 D.C 1000

→
Unwinding of discounts of Deffered Consideration will
be added in Consolidated Finance cost .

PV 1000 PV -
1100 1210
S°FP
-
_
_

' Jan %
31 Dec 016 1Jan #
Tnt Etp 100
↓ Int Exp 110

110
Investment 1000

D. C µ, D C -

D.C 1000
SOFP
I

P.co S -

w-m.vn 100
 IAS -28 Associates
201 .

-501 .

Significant Influence
(Power to
Participate in
Financing & operating Policies of an
Entity)
Treatment : One line Adjustment ( Equity Accounting )

c. V of Investment in Associate
Investment
✓: xxx

xxx✓
"

Adcd?¥osÉÑofiÑof-A.coIoooJ✗3oyJ ✗✗✗
6000 /
cash

(✗✗✗g

as ociated
less :
Impairment in Tnvestment vestment 60h0
in Associate
less : Dividends from Associate ( xxx )
.
PGLICR 60th
less URP → A) ( ✗ ✗"

Ya ¥
: ✗

Carrying Value
Of Investment
✗✗✗
Investment xxx
in

p¥ É÷;:
,

7
Investment xxx

P.to

.
 I 1
/ Janxlb PAT __
20,000 31 Dec ✗ 16
RE -
- 10,000 RE = 30,000

P.co
301 .

12000 8000 P.CO 30%

Retained dividend >
A.co
A .co
sI◦80%

:::→•
This Equity
→
Accounting is for Consolidated Basis .

p→A
Amount
C. R xxx
of Adjustment = URP ✗ 301
.
.

÷
Associate

A → P
 PINE .
AI
for
sales .
-
✗arm am .
→ Just one line
Adjustment
§ ¥I¥
? ¥ᵈ Associate
Again
.
.

A%4aatregprofit-D-GSPH-isif.mx
☒ Less
Impairmeutdgtnvestmat
in Associate .
⊕

soEg↑Fp
CASA)

Add this in
Consol i d ated Less URP shares
of ☒
Onelirettdjudaat
?⃝
 IFRS -
to Consolidated :
IFRS -3 .
Business Combination :

☐j# .

① Pora Oree Investec .

②
Rights
to/ variable Return
Exposure of
.

P.co
③ Current to Exercise Power
Ability through
Involvement
of
.

→ Control
Normally comes with 50%-1 Holding ,
But sometimes
control comes with less than 5%
Holding cᵗ¥?
 Careful
of goods
→ Be with cases -
in -

Transit .

His
Pw ndjnt
⇐÷

?
↳tos.br
Payable 150
.
.

means 1500
goods ifransit
s-d.TT#Iysio
Pwchases-H@sS.w
-

these Reached
goods Party
→ Also when ,
not

,
means Not sold to 3rd Aswell .

( URP) .
 CASH
similarly
in -
Transit
#
= r

AI .

Sto Rea arable-6000

'

SFayabkp.to
. Goro .
 g!.÷:;!←s••%i%
Disposable .

R.E.zoihfi-RE.sn#.--sEP--RE-E
,f!
"

d
Aetssetsgsidisposal
oat
"

Disposal proceeds .
-

= -

t☒?% Date .

i KE
ᵗ rawgnñ 1 NCI •

gs.to
Asset>
✓ ☒ (B)
d- Disposaldate ✗* , lossondisp Slo 's NetBsd
Add
gadafdiifjisod.IT#oi. !
d-
disposalxxx
✗*

dessmciatdi.qqsalCE.EE )→% g. w
-

( xxx
. .

☒*
-

ganictossondisp .
)
 Don't to Add 5. cos RE .(share)
Forget post
.

disposal Date
From ( Acquisition date to in

Retained
Consolidated
Earring
.

¥:* .EE#Y9-e-
"

• µ •

ˢᵗ ʰ!Ñet%n%t99 5%0 317sec

307m
'

t.gs#.--f: ;:.:.-ELREE-St#¥⑤
ospostRE--I5ooo.RE-
14%6 .

¥%%
.

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Ero
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