Financial Accounting - group accounts - Flashcards in University Accounting

IFRS 10 Consolidated financial statements: control if...

(1) Power (>50% shares + 1share) (2) Rights to variable returns (from involvement with investee (3) ability to use power over investee to affect its returns

1 of 28

IFRS 10 rights that give investor power over investee are...

voting rights/ rights to appoint and remove members and entities/ rights to direct investee/ other rights that give holder ability to direct

2 of 28

IFRS 10 power without majority of voting rights (

contactual arrangement between investor and other votes holders/ other contractual arrangements/ investors voting rights/ potential voting rights/ combination

3 of 28

IFRS exemptions: parent don't need to consolidate if all:

(1) wholly owned/ partially owned sub of another entity and other owners don't object and (2) debt/equity not treaded on public markets and (3) didn't file/not in process of filing to be on public market and (4) ultimate parent produces CFS complying

4 of 28

Goodwill definition

future economic benefits arising from assets that are not capable of being individually identified and separately recognised

5 of 28

Goodwill: recognition and measurement

(consideration + NCI + FV adjustments) - identifiable net assets

6 of 28

Goodwill can never be negative

become bargain purchase (gain recognised in SOCI)

7 of 28

Consolidated retained earnings definition

accumulated retained earnings of the group: including all reserves of parent + post acquisition reserves of subsidiary

8 of 28

Consolidated retained earnings recognition and measurement

all reserves of parent + post acquisition reserves of subsidiary - goodwill impairment

9 of 28

Non Controlling interest definition

portion of equity ownership in subsidiary not attributable to parent company who has controlling interest 50%

10 of 28

Non controlling interest: recognition

SOFP (split equity into attributable to equity holders of parent and NCI) SOCI (add up as before then split into attributable to equity holders of parent and NCI) SCSE (split equity in attributable to equity holders or parents and NCI)

11 of 28

Non controlling interest: 2 ways of measurement

(1) NCI's proportionate share of acquirees identifiable net assets (ignoring goodwill) or (2) full fair value (including goodwill)

12 of 28

Fair value definition

amount for which an asset could be exchanged for between knowledgeable willing parties in an arms length (no relationship so act independently) transaction (MV or if MV existed)

13 of 28

Fair value adjustment occurs when shares exchanged and necessary to...

identify FV of shares issued (share premium can be calc) and identify FV attributable to assets and liab of sub because its a barter transaction and a one batch purchase of assets and liab

14 of 28

Fair value adjustment isn't...

revaluation gains to group (income) as only establishing the historic cost to the group of assets and liab that it purchased at acquisition

15 of 28

Fair value adjustment recognition

SOFP (if still attached to assets add on FV and include share premium) SOCI (if assets sold expense FV)

16 of 28

Fair value adjustment affects

Goodwill (FV of consideration, FV adjustment of assets) CRE (FV adjustment of subsidiary reserves) NCI (FV adjustment of net assets) NCI SOCI (post acq profit after tax of sub +/- FV)

17 of 28

Unrealised profit adjustments definition

profit when one company in a group (sub) sells inventory to another company in same group (parent) and these are not yet sold outside the group, so want to ***** out any profit

18 of 28

URP recognition

SOFP (***** out URP from inventories) SOCI (***** out URP from operating profit)

19 of 28

URP measurement

Goodwill (not affected) CRE (***** out URP from either parent reserves or subsidiary) NCI (***** out URP if subsidiary) NCI SOCI (post acq profit after tax of sub - URP)

20 of 28

Consistent accounting policy adjustments definition

comparability is key for useful info (consistency needed), may give rise to consolidation adjustments, can use any combination of accounting policies as long as they give true + fair view + consistent

21 of 28

CAP recognition

SOFP (asset value changed depending on CAP) SOCI (operating profit changes depending on the CAP)

22 of 28

CAP measurements

Goodwill (not affected) CRE (dependent on which CAP parent/subsidiary acquire) NCI (if CAP affects subsidiary) NCI SOCI (post acq profit after tax of sub +/- CAP)

23 of 28

Equity accounting: investment in associates definition

one company has participating (long term and beneficial) interest in another and significant influence (falls short of control) over operating and financial policies

24 of 28

Investment in associates: significant influence definition

actively involved and influential through participation in policy decisions on strategic issues (expansion/contraction/product change/markets...) investing company owns 20%

25 of 28

Investment in associates recognition

SOFP (shown at cost under asset and add onto share premium acq of associates) SOCI (shown as share of profit of associate) SCSE (issue of share capital increases)

26 of 28

Investment in associates measurement

Goodwill (new goodwill for associate) CRE (new reserves of associate) NCI (none) Investment in associate (net assets adj by policies) Share of profit of associate (post acq profits adj by policies)

27 of 28

4 reasons why do business combinations occur?

(1) prodcutive motives (economies of scale/ acq R+D) (2) commercial motives (eliminate comp/ secure supplies) (3) financial motives (diversification reduces risk) (4) political motives (cross border trades/ cultural problems)

28 of 28

Get Revising

Financial Accounting - group accounts

Other cards in this set

Card 2

Front

Back

Card 3

Front

Back

Card 4

Front

Back

Card 5

Front

Back

Comments

Similar Accounting resources:

Other cards in this set

Card 2

Front

Back

Card 3

Front

Back

Card 4

Front

Back

Card 5

Front

Back

Comments

Related discussions on The Student Room

Similar Accounting resources: