合并报表会计.ppt

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1、Consolidation Method,2,Definitions AASB 127 Para.4,Consolidated Financial Statements are the financial statements of a group presented as those of a single economic entityGroup a parent and all its subsidiariesParent entity an entity that has one or more subsidiariesSubsidiary an entity including an

2、 unincorporated entity such as a partnership,that is controlled by another entity,3,Nature of consolidated financial statements,Consolidated statements are the combined financial statements for a group.AASB 3 Business Combinations Appendix A business combination“The bringing together of separate ent

3、ities or businesses into one reporting entity”,4,Appendix A business defined as:An integrated set of activities and assets conducted and managed for the purpose of providing:A return to investors;orlower costs or other economic benefits directly and proportionately to policyholders or participants.,

4、5,The acquisition of an entity contrasts with the acquisition of a group of assets.Accounting for a group of assets is based on AASB 116 Property,Plant and Equipment.,6,Consolidated financial statements provide information on the financial performance and position of multiple entities which are trea

5、ted as a single reporting entity.These statements show only the results oftransacting with parties external to the economic entity.,7,Nature of consolidated financial statements,The consolidated financial statements are produced using the information contained in the financial statements of the enti

6、ties within the economic entity,however the accounts of the individual entities are not affectedThe consolidated financial statements consist of:-Consolidated statement of comprehensive income,-Consolidated statement of changes in equity-Consolidated statement of financial position.,8,Nature of cons

7、olidated financial statements,Who has to prepare consolidated financial statements?AASB 3 para 17:“An acquirer shall be identified for all business combinations.The acquirer is the combining entity that obtains control of the other combining entities or businesses.”,9,AASB 3 Appendix A,Reporting ent

8、ity-An entity in respect of which it is reasonable to expect the existence of users who rely on the entitys general purpose financial report for information that will be useful to them for making and evaluating decisions about the allocation of resources.A reporting entity can be a single entity or

9、a group comprising a parent and all of its subsidiaries.,10,Consolidated financial statements,Consolidated financial statements are prepared not just for the shareholders of the parent entity,but also for a range of users-creditors,employees,lenders,financial advisers,analysts.Reasons for Consolidat

10、ionTo represent as faithfully as possible the financial position,financial performance and cash flows of a parent and its subsidiaries Relevant to usersUnderstandable to usersCompare group to other entities by user,11,Concepts of Consolidation,Entity concept of consolidation assets and liabilities o

11、f parent and subsidiary Non controlling interest(NCI)equity Parent entity concept of consolidationassets and liabilities of parent and subsidiary NCI is a liabilityProprietary concept of consolidationPro-rata consolidation,based on parents share of subsidiary assets and liabilities,12,Control as the

12、 criterion for consolidation,Control-AASB 3 Appendix A“The power to govern the financial and operating policies of an entity or business so as to obtain benefits from its activities”.Subsidiary is an entity that is controlled by another entity.Hence determination of whether one entity controls anoth

13、er is crucial to the determination of which entities should prepare a consolidated financial report.,13,Control,Two parts to the definition:(the power criterion)the ability to direct the financial and operating policies of another entity.(the benefit criterion)the ability to obtain benefits from the

14、 other entity.Passive versus active control may not be actively involved in the management of.Non-shared control can only be one controlling entity.,14,Control,Level of share ownership AASB 127 para 13 control is presumed to exist when the parent owns,directly or indirectly through subsidiaries,more

15、 than half of the voting power of an entityi.e more than 50%of the shares of another entity.Where ownership interest is less than 50%there is less consensus about whether control exists.,15,Existence of effective control,Factors that might indicate the existence of control(AASB 127,par.13)(cont.)Con

16、trol also exists when the parent owns half or less of the voting power of an entity when there ispower over more than half of the voting rights by virtue of an agreement with other investors;(b)power to govern the financial and operating policies of the entity under a statute or an agreement;(c)powe

17、r to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body;or(d)power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by tha

18、t board or body.,16,Consolidation adjustments,AASB 127 para 18-31Combine the accounts of the entitiesBut subject to 3 types of adjustments:(i)The substitution elimination entry(ii)Elimination of inter-entity transactions e.g.sales,and their effects(iii)Accounting for any Non controlling interest,17,

19、Consolidation adjustments,Consolidation adjustments are NOT made in the records of the parent or the subsidiary,but on a consolidation worksheet or in a special consolidation journal.May need to repeat certain adjustments every year.,18,Consolidation worksheet format,19,1.The elimination entry,In ef

20、fect we:(i)substitute the assets and liabilities of the subsidiary for the asset“Shares in S Ltd”that is shown on the parent companys balance sheet(ii)eliminate the parent companys interest in the acquisition date equity of the subsidiary,20,P Ltd 80%S Ltd,The elimination entry,21,The elimination en

21、try,Immediately before acquisition:P LtdS LtdShare capital$200$150Retained earnings100100$300$250Cash$50$250Shares in S Ltd250_-$300$250Q:what are the assets,and equity of the economic entity?,22,The elimination entry,We cannot simply add the financial statements together:P Ltd S LtdSumShare capital

22、$200$150$350Retained earnings100100200$300$250$550Cash$50$250$300Shares in S Ltd250_-250$300$250$550,23,The elimination entry,The economic entitys financial position is:Share capital$200(Capital of P Ltd)Ret.earnings100(Ret.earnings of P Ltd)$300Cash$300(P Ltd+S Ltd)When adding the financial stateme

23、nts together we need to make adjustments.,24,The elimination entry,Adjustments:(a)Eliminate“Shares in S Ltd”An entity cannot show shares in itself as an asset.Shares in S cannot appear on the group balance sheet.(b)Eliminate the equity of S Ltd existing at acquisition date i.e.the pre-acquisition eq

24、uityIncluding both the net assets of S Ltd and the equity accounts of S at the acquisition date would double-count the net assets of S.,25,The elimination entry,This entry eliminates the investment account of the parent entity(“Shares in S Ltd”)and the parent companys 100%interest in the acquisition

25、-date equity of the subsidiary:Share CapitalDr150Retained EarningsDr100Shares in S LtdCr250,26,27,The elimination entry,The elimination entry can be prepared using an acquisition analysis:At 1 July 2004:FV of net assets of S Ltd=$250 cash($150 capital+$100 ret.earn.)FV acquired by P Ltd=100%x$250=$2

26、50Cost of acquisition=$250Goodwill/Gain on bargain purchase=zero,28,The elimination entry,Assume in the 2004-5 period that S Ltd records a net profit after tax of$75.These are all post-acquisition profits they do not affect the elimination entry.The consolidated financial statements show only the po

27、st-acquisition equity of the subsidiary.ALL pre-acquisition equity of the subsidiary is eliminated on consolidation.,29,30,The elimination entry,The entry at 30/6/05 is:Retained Profits(1/7/04)Dr100Share CapitalDr150Shares in S LtdCr250At 30/6/06:Retained Profits(1/7/05)Dr100Share CapitalDr150Shares

28、 in S LtdCr250Needs to be repeated in each years worksheet,31,Dividends from pre-acquisition equity,Dividends paid by a subsidiary out of pre-acquisition profits i.e.from the balance of retained earnings existing at the acquisition date are not treated as revenue by the parent company but as a reduc

29、tion of the carrying amount of“Shares in S Ltd”.NB.P Ltd will never pay a dividend to S Ltd.Why?,32,Dividends from pre-acquisition equity,Before doing the substitution elimination entry we need to determine if“Shares in S”has been written down by the amount of a pre-acquisition dividend paid by S to

30、 P.Compare the carrying amount of“Shares in S”with the purchase price paid by P.If“Shares in S”has been written down we must reverse this write-down and bring“Shares in S”back to the original cost.,33,Dividends from pre-acquisition equity,In the books of S the net effect of declaring and paying a di

31、vidend from pre-acquisition profits is:Dr Retained earningsxxxCr BankxxxIn the books of P the net effect of receiving this dividend is:Dr BankxxxCr Shares in Sxxx,34,Dividends from pre-acquisition equity,Why doesnt P credit a revenue account with the amount of the dividend?Because P will treat the d

32、ividend as a partial return of the purchase price it paid for its asset“Shares in S”.To reverse the effect of this transaction:Dr Shares in SxxxCr Retained profits(opening)xxx(if dividend was paid in a previous period),35,Dividends from pre-acquisition equity,If the dividend was declared and paid in

33、 the current period:Dr Shares In SxxxCr Interim dividend paid*xxx*a negative appropriation account,36,Dividends from pre-acquisition equity,P owns 100%of S.On 1 June,S declares a final dividend of$30 which will be paid in August.This is recorded:In S Ltds records:Dr Final dividend provided 30Cr Divi

34、dend payable30In P Ltds records:Dr Dividend receivable 30Cr Shares in S Ltd30,37,Dividends from pre-acquisition equity,To reverse these entries at date of consolidation:Dr Shares in S30Cr Dividend receivable30Dr Dividend payable30Cr Final dividend provided30,38,Goodwill,“Goodwill on consolidation”ar

35、ises when the cost of the investment in a subsidiary is greater than the total fair value of the net assets acquired.It appears only on the consolidated balance sheet.The elimination journal entry will include a balancing debit to goodwill.,39,Goodwill,Acquisition analysis at 1/7/04:FV of NA of S Lt

36、d=$150+$100=$250Cost of acquisition=$300Goodwill=$300-$250=$50,40,Goodwill,The elimination entry at 1/7/04:Retained Earnings Dr100Share CapitalDr150GoodwillDr50Shares in S LtdCr300,41,42,Goodwill,30/6/05Dr Impairment Loss5Cr Accumulated Impairment Losses 5Remember the elimination entry will also hav

37、e to be done.,43,Gain on bargain purchase,This arises when the purchase price of the investment is less than the total fair value of the net assets acquired.Before gain on bargain purchase is recognised,AASB 3 requires that the acquirer shall reassess the procedure to ensure there is a gain.,44,Gain

38、 on bargain purchase,45,Gain on bargain purchase,Acquisition analysis at 1/7/04:FV of net assets of S Ltd=$150+$150=$300Cost of acquisition=$273Gain on bargain purchase=$27,46,Gain on bargain purchase,Substitution elimination entry at 1/7/04:Ret EarningsDr150Share CapitalDr150Excess(P&L)Cr27Shares in S LtdCr273,