This document discusses consolidated financial statements and the process of consolidation. It defines a group as a parent company that controls one or more subsidiary companies. The key points are:
- Consolidated financial statements combine the financial statements of a parent and its subsidiaries to present them as a single entity.
- The consolidation process involves replacing the parent's cost of investment with its share of the subsidiary's net assets. It also credits the parent's reserves with its share of the subsidiary's post-acquisition reserves.
- Goodwill arises as the difference between the cost of acquisition and the acquirer's interest in the fair value of the identifiable assets acquired and liabilities assumed in a business combination.
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing.
There are three parties directly involved: the factor who purchases the receivable, the one who sells the receivable, and the debtor who has a financial liability that requires him or her to make a payment to the owner of the invoice.
There are various types of factoring:
Recourse, Non - recourse, maturity and cross - border factoring.
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing.
There are three parties directly involved: the factor who purchases the receivable, the one who sells the receivable, and the debtor who has a financial liability that requires him or her to make a payment to the owner of the invoice.
There are various types of factoring:
Recourse, Non - recourse, maturity and cross - border factoring.
Trading has changed from local to global and so have the processes from paper to Online. The result is change in process from T+3 to T+1 and real time trading and settlement of a trade.
Amalgamation, absorption and purchase considerationBIJIN PHILIP
This presentation contain information regarding amalgamation, absorption, types of amalgamation, purchase consideration and different methods of calculating purchase consideration.
Derivative is a financial instrument that derives its value from the value of some underlying asset. When the prices of commodities, currencies, securities, and interest rate are not fixed and keep on fluctuating, it becomes very necessary to hedge. Copy the link given below and paste it in new browser window to get more information on Derivatives and Hedging:- http://www.transtutors.com/homework-help/finance/derivaties-and-hedging.aspx
Trading has changed from local to global and so have the processes from paper to Online. The result is change in process from T+3 to T+1 and real time trading and settlement of a trade.
Amalgamation, absorption and purchase considerationBIJIN PHILIP
This presentation contain information regarding amalgamation, absorption, types of amalgamation, purchase consideration and different methods of calculating purchase consideration.
Derivative is a financial instrument that derives its value from the value of some underlying asset. When the prices of commodities, currencies, securities, and interest rate are not fixed and keep on fluctuating, it becomes very necessary to hedge. Copy the link given below and paste it in new browser window to get more information on Derivatives and Hedging:- http://www.transtutors.com/homework-help/finance/derivaties-and-hedging.aspx
Balance Sheet (Financial) ConsolidationDhiren Gala
There is always a challenge to close the accounting books quickly & publish the statutory balance sheets with profit and loss accounts statement or for that matter internal financial MIS for monthly quarterly or yearly. There are various challenges when there are group of companies, local subsidiaries, international subsidiaries, branches, strategic business units, sister concerns, joint ventures, merger, acquisitions, investment companies, SPV’s etc. data to be consolidated in single financial report.
CFO team is always under pressure to publish quarterly, half yearly and yearly statements based on Indian GAAP or US GAAP or IFRS or any other formats of publishing data. There are challenges to map and consolidate data from multiple entities, multiple accounting period and multiple currencies. Finance team lead by CFO works days and weeks on multiple spreadsheets to arrive a final statement. While doing this exercise finance team faces several challenges.
Technology can also be a barrier to close books faster. Companies that use desktop spreadsheets to manage their accounting, closing takes about 25% longer to get it done. If the company is still busy closing its books, it can and should do better. We help companies CLOSE YOUR BOOKS FASTER WITH ACCURACY AND EXTENSIVE ANALYTICS.
1KEY Financial Consolidation software is a complete data warehouse model with standard statutory reporting requirements for publishing financial statements and with extensive analytical reports. It provides financial managers the ability to rapidly close and report financial results, meet global regulatory requirements, reduce compliance costs and provide confidence in the numbers.
Accelerate closing cycle and improve the quality of data – remove the pain of consolidation of financial management & reporting cycle. Organizations that are able to close their books quickly & deliver faster & more accurate information can gain a competitive advantage in a rapidly changing market. Provide financial managers the ability to rapidly close & report financial results, meet global regulatory requirements, reduce compliance costs with trust in numbers.
CLOSE BOOKS – Faster | Error Free | with Extensive Analytics is the strategic and exclusive Financial Technologies event that presents the challenges, solutions for Financial Consolidation from industry thought leaders in an interactive knowledge-sharing environment.
Solution Manual Advanced Financial Accounting by Baker 9th Edition Chapter 18Saskia Ahmad
Solution Manual Advanced Financial Accounting by Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker 9th Edition Chapter 18
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
• The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
• The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X.
• The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
Francesca Gottschalk - How can education support child empowerment.pptxEduSkills OECD
Francesca Gottschalk from the OECD’s Centre for Educational Research and Innovation presents at the Ask an Expert Webinar: How can education support child empowerment?
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasn’t one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
The Roman Empire A Historical Colossus.pdfkaushalkr1407
The Roman Empire, a vast and enduring power, stands as one of history's most remarkable civilizations, leaving an indelible imprint on the world. It emerged from the Roman Republic, transitioning into an imperial powerhouse under the leadership of Augustus Caesar in 27 BCE. This transformation marked the beginning of an era defined by unprecedented territorial expansion, architectural marvels, and profound cultural influence.
The empire's roots lie in the city of Rome, founded, according to legend, by Romulus in 753 BCE. Over centuries, Rome evolved from a small settlement to a formidable republic, characterized by a complex political system with elected officials and checks on power. However, internal strife, class conflicts, and military ambitions paved the way for the end of the Republic. Julius Caesar’s dictatorship and subsequent assassination in 44 BCE created a power vacuum, leading to a civil war. Octavian, later Augustus, emerged victorious, heralding the Roman Empire’s birth.
Under Augustus, the empire experienced the Pax Romana, a 200-year period of relative peace and stability. Augustus reformed the military, established efficient administrative systems, and initiated grand construction projects. The empire's borders expanded, encompassing territories from Britain to Egypt and from Spain to the Euphrates. Roman legions, renowned for their discipline and engineering prowess, secured and maintained these vast territories, building roads, fortifications, and cities that facilitated control and integration.
The Roman Empire’s society was hierarchical, with a rigid class system. At the top were the patricians, wealthy elites who held significant political power. Below them were the plebeians, free citizens with limited political influence, and the vast numbers of slaves who formed the backbone of the economy. The family unit was central, governed by the paterfamilias, the male head who held absolute authority.
Culturally, the Romans were eclectic, absorbing and adapting elements from the civilizations they encountered, particularly the Greeks. Roman art, literature, and philosophy reflected this synthesis, creating a rich cultural tapestry. Latin, the Roman language, became the lingua franca of the Western world, influencing numerous modern languages.
Roman architecture and engineering achievements were monumental. They perfected the arch, vault, and dome, constructing enduring structures like the Colosseum, Pantheon, and aqueducts. These engineering marvels not only showcased Roman ingenuity but also served practical purposes, from public entertainment to water supply.
2. KAPP Edge Solutions Pvt. Ltd.
What is a group?
A group is where one parent company (holding company) control one or more companies (subsidiary company) by way of
Dominant influence or Participating interest.
IAS 27 consolidated and separate financial statements
IAS 27 has two objectives:
(1) Preparation and presentation of consolidated financial statements for a group of entities
under the control of a parent; and
(2) In accounting for investments in subsidiaries, jointly controlled entities and associates in the
separate individual (non-consolidated) financial statements.
IAS 27 specifically does not allow the following reasons as exemptions:
Different nature of business
Severe long-term restrictions
IAS 27 states that the investment in the subsidiary must be shown in the statement of financial of the parent company’s
separate financial statement either:
(i) At cost or
(ii) Using IAS 39 financial instruments - recognition and measurement
.
General provisions of IAS 27 for consolidation
Accounting policies
Accounting period and dates
Date of acquisition or disposal.
Inter company transactions
Non controlling interest - minority interest
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
A company which has a subsidiary on the last day of its accounting period must prepare consolidated financial
statements in addition to its own individual accounts.
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Consolidation involves the replacement of cost of investment in the parent’s accounts by
what it actually represents i.e:
Parent’s share of the net assets of the subsidiary as at the end of the reporting period;
AND
Any remaining element of the goodwill which the parent paid for at the date of acquisition.
In addition to this, the reserves of the parent must be credited with the parent’s share of the
subsidiary’s post-acquisition reserves so that the accounts balance.
Goodwill
Goodwill is the difference between the value of the business taken as a whole and the fair value of its
separate net assets.
Note
The idea is that when a company buys an interest in another it will pay a price that reflects both the
assets it buys and the goodwill. It can be calculated as:
GOODWILL = COST less: SHARE OF NET ASSETS
Consolidation
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↓ ↓
Parent Subsidiary
Net assets X X X
+
Issued
capital X X = X
Reserves X X X
X X X
= = =
+
CONSOLIDATION
ADJUSTMENTS
INDIVIDUAL COMPANY
ADJUSTMENTS
Consolidated statement
of financial position
Overview of the technique
Individual company adjustments
In exam questions the statements of financial position initially provided will be
incorrect/deficient, the must be corrected before the consolidation can proceed.
The approach may be broadly represented as follows
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Consolidation adjustments
Two types
Major
Inter-
company
adjustmen
ts
adjustmen
ts
*Consolidated reserves
*Goodwill
* Inventory
* Non-current asset
transfers
*Non-controlling interests
Those that “drive” the * Inter company
balances
double entry:
* Unrealised profit
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Inter-company balances
Consolidation represents the position and performance of a group of companies as if they were a single entity.
̈If the members of the group trade with each other (as is likely) a receivable in one set of accounts will be balanced out by
a payable in another. When statements of financial position are combined on consolidation these amounts are cancelled
out against each other in the group accounts.
Adjustments
Illustration
Parent owns 80% of Subsidiary. Parent sells goods to Subsidiary. At the end of the reporting period the accounts of
the two entities contain inter-company balances (also called intra-group).
These amounts are contained in accounts that are often described as Current accounts in the receivables and
payables sections of the appropriate statement of financial position .
As far as the individual entities are concerned it is quite correct that the balances appear in this way as they represent
amounts that will be received by/ paid to the separate entities.
Parent Subsidiary
Receivables
Amount receivable
from Subsidiary 1,000
Payables
Amount payable to Parent
1,000
Usually the assets and the liabilities of the group are a straightforward cross cast of the individual items in the
accounts of the parent company and its subsidiaries. If this occurred in respect of inter-company amounts the
financial statements of the group would end up showing cash owed from and to itself. This would clearly be
misleading.
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To avoid this, the inter-company amounts are cancelled on consolidation.
Parent Subsidiary
Consolidated
statement of
financial position
Receivables Dr Cr
Amount receivable from Subsidiary 1000 1000 -
Payables
Amount payable to Parent 1,000 1,000 -
Adjustments on
consolidation
Unrealised profit
Inter-company balances are cancelled on consolidation. The main reason for these arising is intercompany (or intra-
group) trading.
If a member of a group sells inventory to another member of the group and that inventory is still held by the
buying company at the end of the reporting period:
̌ The company that made the sale will show profit in its own accounts.
This is correct from the individual company’s viewpoint. However, this profit will not have been realised from the group’s
perspective.
̌ The company that made the purchase will record the inventory at cost to itself. This is also correct from the
individual company view. However consolidation of this value will result in the inclusion in the financial statements of a
figure which is not at cost to the group.
̈ IAS 27 Consolidated and Separate Financial Statements rules that “… resulting unrealised profits
shall be eliminated in full.” This implies that the unrealised profit is eliminated from the inventory value. However, the
Standard does not rule on the other side of the entry. There are two possibilities.
(1) The whole amount of the unrealised profit adjustment is “suffered” by the parent company’s shareholders:
̌ Reduce the inventory value in the consolidated statement of financial position and profit or loss.
̌ Treat the adjustment as a consolidation adjustment.
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The reduction of closing inventory in the consolidated statement of comprehensive income would reduce the profit
for the year and hence the retained earnings figure at the bottom of the statement of financial position.
The direction of the sale (Parent to Subsidiary or Subsidiary to Parent) would be irrelevant.
(2) Share the adjustment between the parent company’s shareholders and the non-controlling interest as
appropriate:
̌ Reduce the inventory value in the consolidated statement of financial position and statement of
comprehensive income and then give the non-controlling interest their share.
̌ This is easily achieved by making an adjustment in the books of the group company that made the
sale to the other group company (i.e. seller adjustment), as a consolidation adjustment.
̌ The direction of sale is now important.
Inventory
̈ One group company may sell inventory to another at a profit.
̌ Inventories in the statement of financial position are valued at lower of cost and net realisable value
(NRV). In the consolidated statement of financial position, where the group is reflected as a single entity, inventories
must be at lower of cost and NRV to the group.
̌ The group needs to eliminate profit made by the selling company if inventory is still held by the group
at the end of the reporting period, as the group has not yet realised this profit.
̌ Applying single entity concept, group has bought and is holding inventory.
̈ There are two ways in which the unrealised profit can be eliminated from the consolidated financial
statements:
̌ as a parent adjustment against group totals after the subsidiaries’financial statements have been
consolidated with the parent; or
̌ as an adjustment by the seller before consolidation .
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Parent adjustment
̈ Adjustments:
̌ Consolidated inventory in the statement of financial position; and
̌ Consolidated closing inventory in the statement of comprehensive income (and therefore retained
earnings).
Seller adjustment
̈ Adjustments from seller perspective:
̌ Inventory in the statement of financial position ;
̌ Closing inventory in the statement of comprehensive income
Non-current asset transfers
̈ In accordance with the single entity concept the group accounts should reflect the non-current assets at the
amount they would have been stated at had the transfer not been made.
̈ On an intra-group transfer a profit/loss may have been recognised by the selling company. This must be
removed on consolidation.
̈ The buying company will include the asset at cost (which is different to cost to the group) and will depreciate
the asset. The charge for the year will be different to what it would have been if no transfer had occurred.
̈ Summary of adjustments needed:
̌ Remove profit
̌ Correct the depreciation charge
The unrealised profit will be in the accounts of the selling company and the depreciation adjustment will be
made in the accounts of the company buying the asset.
Approach
̈ Construct a working, which shows the figures in the accounts, and what would be in the accounts with no
transfer.
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FURTHER ADJUSTMENTS
Adjustments
Consolidation problems are usually tackled in two stages:
Stage 1 Process the individual company adjustments.
Stage 2 Do the consolidation.
Items not accounted for
Dividends payable
If draft statements of financial position of group companies have not yet recognised dividends declared before the
year end closing adjustments will need to be made before consolidation
Process adjustments to finalise individual statements of financial position before consolidation
In books of proposing company
Dr Retained earnings (in statement of changes in equity) X
Cr Current liabilities – dividends payable X
(with dividend payable.)
If the subsidiary is declaring the dividend, the parent will receive its share. This dividend now represents reserves-in-
transit. The parent must record its dividend receivable.
Dr Dividend receivable X
Cr Profit or loss X
(with share of dividend receivable from the subsidiary.)
The dividend receivable and liability are inter-company balances and must be cancelled.
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Consolidated statement of financial position will reflect in liabilities:
• Parent’s dividends payable;
• Non-controlling interests’share of the subsidiary’s dividends payable.
Dividends paid out of pre-acquisition profits
Goodwill is the difference between:
The net assets of the subsidiary at the date of acquisition (as represented by issued capital and reserves); and
The cost of shares acquired.
A dividend declared out of pre-acquisition profits represents a distribution of the assets at acquisition. The parent is
therefore realising part of its investment (i.e. the assets in which it invested).
Crediting such dividends to “Cost of investment” in the parent’s books will reduce goodwill.
Group accounting policy adjustments
IAS 27 states that the accounts of subsidiaries are to be drawn up according to the same accounting policies as the
holding company. If this is not the case then the accounts of the subsidiary may have to be restated in line with the
group policy.
Such a requirement is rare in practice because a situation that required it would by definition be contrary to the IAS.
It might be needed in the cases of:
Mid year acquisition – where the parent has not yet imposed its policies on the subsidiary; or
Where the subsidiary was foreign and was following local GAAP.
12. KAPP Edge Solutions Pvt. Ltd.
Goodwill
Definition
IFRS 3 defines goodwill as “an asset representing the future economic benefits arising from other assets acquired
in a business combination that are not individually identified and separately recognised”. In essence it is the
difference between the cost of the acquisition and the acquirer’s interest in the fair value of its identifiable
assets acquired and liabilities assumed as at the date of the exchange transaction.
This is reflected in consolidation workings as:
$
Cost (the value of the part of the business owned) X
Acquirer’s share of the fair value of the identifiable assets,
liabilities and contingent liabilities of the subsidiary as
at the date of acquisition (X)
____
X
____
As a result of the revisions to IFRS 3, issued in 2008, the non-controlling interests’share of goodwill may be recognised
as part of the acquisition process. The option to measure non-controlling interests is allowed on a transaction-by-
transaction basis.
As a result of this change in the possible measurement of both goodwill and non-controlling interests IFRS 3 specifies
the goodwill calculation as follows:
$
Acquisition date fair value of the consideration transferred X
Amount of any non-controlling interests in the entity acquired X
Less: Acquisition date amounts of identifiable assets acquired
and liabilities assumed measured in accordance with IFRS 3 (X)
____
Goodwill X
____
If the subsidiary has not reflected fair values in its accounts, this must be done before consolidating.
13. KAPP Edge Solutions Pvt. Ltd.
Cost of acquisition – Fair value of purchase consideration
An acquisition is accounted for at its cost. Cost is:
Amount of cash or cash equivalents paid; and
The fair value of the other purchase consideration given.
Any costs directly associated with the acquisition of the subsidiary are to be expensed through profit or loss as a period costs.
Deferred consideration
Deferred consideration – cost of the acquisition is the present value of the consideration, taking into account any premium or
discount likely to be incurred in settlement (and not the nominal value of the payable).
Contingent consideration
When a business combination agreement provides for an adjustment to the cost, contingent on future events, the acquirer
includes the acquisition date fair value of the contingent consideration in the calculation of the consideration paid.
If the contingent settlement is to be in cash, then a liability will be recognised. If settlement is to be through the issue of
further equity instruments, then the credit entry will be to equity.
Any non-measurement period changes to the contingent consideration recognised will be accounted for in accordance with
the relevant IFRS and will not impact upon the original calculation of goodwill.
Recognition
Introduction
The identifiable assets and liabilities acquired are recognised separately as at the date of acquisition (and therefore
feature in the calculation of goodwill).
This may mean that some assets, especially intangible assets, will be recognised in the consolidated statement of
financial position that were not recognised in the subsidiary’s single entity statement of financial position.
Any future costs that the acquirer expects to incur in respect of plans to restructure the subsidiary must not be
recognised as a provision at the acquisition date. They will be treated as a post-acquisition cost.
14. KAPP Edge Solutions Pvt. Ltd.
Contingent liabilities of the acquiree
IAS 37 Provisions, Contingent Liabilities and Contingent Assets does not require contingent liabilities to be recognised
in the financial statements.
However, if a contingent liability of the subsidiary has arisen due to a present obligation that has not been recognised
(because an outflow of economic benefits is not probable) IFRS 3 requires this present obligation to be recognised
in the consolidated financial statements as long as its fair value can be measured reliably.
This will mean that some contingent liabilities will be recognised in the consolidated statement of financial position that
were not recognised in the single entity’s statement of financial position.
Measurement
All assets and liabilities of the subsidiary that are recognised in the consolidated statement of financial position are
measured at their acquisition date fair values.
The non-controlling interests of the subsidiary are measured at either:
fair value; or
the non-controlling interests’proportionate share of the subsidiary’s identifiable net assets.
Exceptions to recognition and measurement principles
Exceptions to both recognition and measurement principles
Deferred taxes are recognised and measured in accordance with IAS 12. Employee benefits are recognised and measured
in accordance with IAS 19.
Any indemnification assets (e.g. a guarantee given by the seller against a future event or contingency) are recognised and
measured using the same principles of recognition and measurement as for the item that is being indemnified.
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Fair values – general guidance
Marketable securities – current market values.
Non-marketable securities – estimated values that take account of price earnings ratios, dividend yields and
expected growth rates of comparable securities of entities with similar characteristics.
Receivables – at the present values of the amounts to be received, determined at appropriate current interest
rates, less allowances for uncollectibility and collection costs, if necessary
Inventories :
finished goods and merchandise at selling price less:
costs of disposal; and
a reasonable profit allowance for the acquirer’s selling effort (based on profit for similar items);
work in progress at selling price of finished goods less:
costs to complete;
costs of disposal; and
a reasonable profit allowance for the completing and selling effort (based on profit for similar finished
goods; and
raw materials at current replacement costs.
Land and buildings – at their current market value.
Plant and equipment – at market value normally determined by appraisal.
.
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Intangible assets – at fair value determined: by reference to an active market;
if no active market exists at an amount that the entity would have paid for the asset in an arm’s length transaction
between knowledgeable and willing parties based on the best information available
Defined benefit plans assets or liabilities at present value of the defined benefit obligation less the fair value of
the plans assets.
Tax assets and liabilities – at the amount of the tax benefit arising from tax losses or the taxes payable in respect
of the profit or loss, assessed from the perspective of the combined entity or group resulting from the acquisition.
The tax recognised will be after allowing for the effects of fair valuing the assets, liabilities and contingent
liabilities of the acquiree. The amount recognised is not discounted.
Accounts and notes payable – long-term debt, liabilities, accruals and other claims payable at the present values of
amounts to be disbursed in meeting the liability determined at appropriate current interest rates.
Onerous contracts and other identifiable liabilities of the acquiree – at the present values of amounts to be
disbursed in meeting the obligation determined at appropriate current interest rates.
Contingent Liabilities of the acquiree will be valued at the amounts third parties would charge to take them over.
The amount reflects all expectations about future cash flows.
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Accounting for the revaluation in the accounts of subsidiaries
If the subsidiary has not reflected fair values in its accounts, this must be done before consolidating.
For a revaluation upwards create a revaluation surplus in net assets working (fair value less book value
of net assets at acquisition) at acquisition and the end of the reporting period .
For a revaluation downwards create a provision against retained earnings in net assets working (book
value less fair value of net assets at acquisition) at acquisition and the end of the reporting period .
Goodwill in the subsidiary’s statement of financial position is not part of identifiable assets and
liabilities acquired. If the subsidiary’s own statement of financial position at acquisition includes
goodwill, this must be written off.
Reduce retained earnings at acquisition and the end of the reporting period by goodwill in the
subsidiary’s statement of financial position at acquisition. Do this in the net assets working.
IFRS 3 refers to this as “allocation of the cost of acquisition”.
IFRS 3 requires the whole revaluation to be reflected in the consolidated group accounts. The non-
controlling interests balance will reflect their share of the revaluation.
18. KAPP Edge Solutions Pvt. Ltd.
Accounting for goodwill
Goodwill
Goodwill reflects the future economic benefits arising from assets that are not capable of being
identified individually or recognised separately.
It is initially measured at cost, being the excess of the cost of the acquisition over the acquirer’s interest
in the fair value of the identifiable assets, and liabilities acquired as at the date of the acquisition. It
is recognised as an asset.
Subsequent to initial recognition goodwill is carried at cost less any accumulated impairment losses.
Goodwill is tested annually for impairment; any loss is expensed to profit or loss.
Bargain purchases
If on initial measurement the fair value of the acquiree’s net assets exceeds the cost of acquisition , then
the acquirer reassesses:
the value of net assets acquired;
that all relevant assets and liabilities have been identified; and that the cost of the combination has been
correctly measured.
If there still remains an excess after the reassessment then that excess is recognised immediately in
profit or loss. This excess (gain) could have arisen due to:
future costs not being reflected in the acquisition process;
measurement of items not at fair value, if required by another standard, such as deferred tax being
undiscounted;
bargain purchase.
known within the “measurement period”.
19. KAPP Edge Solutions Pvt. Ltd.
Measurement period
The measurement period is the period after the acquisition date during which the parent may adjust the provisional
amounts recognised in respect of the acquisition of a subsidiary.
The measurement period cannot exceed one year after the acquisition date.
Subsequent adjustments
Any other adjustments are treated in accordance with IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors.
An error in acquisition values is treated retrospectively. A change in estimate is treated prospectively.
Impairment of goodwill
General
Goodwill on acquisition must be allocated to a cash generating unit (CGU) that benefits from the acquisition. A
CGU need not necessarily be a unit of the subsidiary acquired; it could be a unit of the parent or another
subsidiary in the group.
The unit must be at least that of an operating segment (as defined under IFRS 8 Operating Segments), that is, a
distinguishable component.
Each CGU must be tested annually for impairment. The test must be carried out at the same time each year, but
does not have to be carried out at the year end.
Partially-owned subsidiary
Any goodwill in a partially-owned subsidiary, where the amount of the non-controlling interest’s share of goodwill
has not been recognised, must be grossed up to include the non-controlling interests’share of goodwill for the
purposes of the impairment test.
Any impairment is firstly allocated against this grossed up goodwill figure.
Any impairment in excess of this grossed up goodwill is then allocated against the remaining assets of the CGU on
a pro-rata basis.
20. KAPP Edge Solutions Pvt. Ltd.
At acquisition
X X
______ ______
X X
X X
X X
NON-CONTROLLING
INTERESTS GOODWILL
×% × Net asset at end of Cost X
acquisition (X)
X
_____
_____
_____
acquisition profits
Goodwill adjustment (X)
(X)
Adjustments (X)
X
× x%
Subsidiary share of post
_____
All of Parent
per Q X
acquired
Share net assets
x% × Net assets at
CONSOLIDATED RETAINED EARNINGS
______ ______
the reporting period
Fair value
reserve
______ ______
per Q X X
Adjustments (X)
At balance sheet date
Issued capital
Retained earnings