CJE1 Eliminate investment, recognise NCI and GW (acq date rate) Statement of Cash flows Simultaneous Consolidation Asset

Simultaneous Consolidation Asset substitution: Elimination of investment in subsidiary and substitute

CJE2: FCTR (translation loss) on GW and FV adj Consolidated NPAT X Supplementary CJE1 Eliminate investment in X and Y with identifiable assets and liabilities. Residual is goodwill
Dr FCTR 49,400 If FCTR is a gain, Cr FCTR Ps NPAT + Subsi NPAT (100%) Footnotes (FRS 7 CJE2 Eliminate div Intermediate parent X use Direct NCI Y use DIRECT NCI % - prevents double counting of assets
Dr DTL 600 Ave Acq + Assoc NPAT (Ps share) Para 40) CJE3 Eliminate Interco loans - In grp or consol FS, Investment account is zero
Cr Goodwill 47,000 CR1-Acq Div from S Div from A All Assets CJE4 Allocate post-acq RE for X and Y both use direct + indirect NCI % Biz: integrated set of activities or assets capable of generating returns to
Cr Inventory 3,000 Ave Acq Add back/Less Non-cash Items X disposed CJE5 Allocate post-acq RR both use direct + indirect NCI % owners & investors & members + capable of being managed to provide
Do depn or COS table to reflect diff aveR for past few years to find Inv + depreciation/ amort /impairment (@ CR1 + CJE6 Allocate current income to NCI of X NPAT X Div from Y = Adj NPAT X returns to investors
FRS 12:32 - Share of profit from Assoc (Consol adj) Goodwill CJE7 Allocate current income to NCI of Y Direct + indirect need not always have output e.g. startups, developmental phases
Exchange gain on interco loan considered as gain on net investment in subsidiary. - Remeasurement gain (consol adj) - All L + DTL AC checks are the same Acquirer has control over biz when:
Loan deemed as an extension of net investment. - Profit on sale of fixed assets undervalued A (- 1. power over acquiree
Reclassification of exchange gain (after-tax) - Profit on sale of Subsi ve) Analytical check on NCI of Indirect subsi direct + indirect interests 2. rights to returns
Dr Exchange gain on loan Cr FCTR Cr Tax expense Add/ (Less) Increase/(increase) in WC (CA CL) X All at CR1 rates Total BVE of Y at end period X 3. ability to use power to affect (good & Bad) aquiree's returns
CJE3 Allocation of FCTR to NCI (translation loss) Increase in inventory(-ve) + remaining unamortised bal of Intangibles aft tax X IFRS 3- All biz combi need to use acquisition method
Dr NCI 11,348 Cr FCTR (equity) 11,348 (Dr FCTR translation gain) Decrease in AR (+ve) - NCI even if infinite useful life 1. Direct acquisition of Net Assets of biz
FCTR Total NCI Share 10% Increase in AP(-ve) deconsolidated - Unrealised profit from US sale of inv aft tax (unsold %) (X) - purchase of combi of assets, goodwill, not the voting rights
Translation loss (79,080) (7,908) Operating Cash Flows X = INA disposed no parent-subsi rs | Goodwill in acquirer FS
Adj total SH/E of X at end period X
on BV assets end of current period FCTR - FCTR Realised legal entity = economic entity | Consolidation not required
Dividends declared (-ve) Total NCI share of equity at end period (direct + indirect) X
Translation loss (47,000) (3,200) + Profit on disposal No NCI a form of selective acquisition 100% acquisition
Dividends declared to NCI (-ve) X
on Goodwill Diff between acq and CR 1 NCI GW X (CR1 acq) + Goodwill attributable to Ys NCI X e.g. hotel, Lenovo buying the Thinkpad
Proceeds from loans obtained (+ve)
Translation loss (2,400) (240) = Sales proceeds NCI of Y X 2. Biz become subsidiary of acquirer**
Acquisition of add. interest in subsi owner trxn
on FV adj Translation loss on - Cash bal Acquisition of equity or voting rights of other legal entities. Businesses can
no change in control
undervalued inv + DTL disposed Analytical check on NCI of Direct subsi X after tax be combined by contract alone (common)
Cash Flows from financing activities
FX gain aft taxes = Net Cash BVE of X at end period X Legal entity is not economic entity | Consolidation is required
Acquisition of subsidiary (-ve) Change in control
proceed from - Investment in Y (X) Acquirer recognizes goodwill in consolidated FS | NCI of Net assets of
Total (128,480) (11,348) Disposal of subsidiary (+ve)
disposal acquire in consolidated FS of economic entity | Subsequent cumulative
Div received from associate, consol adj (+ve) + Xs share of Y SH/E
depreciation and amortization has to be repeated at each consolidation
CJE: Upstream transfer of Assets CJE: Downstream trf of assets Fixed assets purchased (-ve) X X
All Assets year-end as long as investment in the subsidiary remains
(easier) First year!! Proceeds from sale of FA, Profit + NBV (+ve) + remaining unamortised bal of intangible asset aft tax X
acquired 3. Net assets of combining entities trf to a newly-formed entity
Eliminate intragroup txn Eliminate intragroup txn (reverse, Cash flows from Investing activities - Unrealised profit from upstream sale of inv aft tax (unsold %) (X) Controlling party is deemed to be the acquirer
- All liabilities
Dr Sales (TP) (S) eliminate) Net Cash inflows/ (outflows) X - DTL Adj total SH/E of X X Goodwill and FV of assets are recognized in newly-formed entitys FS |
Cr COS (S + P) Dr Sales (P) 120,000 CCE Beg period X = FV INA NCI share of BVE end period 10% X Consolidation not required as separate legal entities have ceased to
Cr Inventory (P) 24,000 Dr FCTR (G) 2,000 + Change in CCE within period + Goodwill on acq + X goodwill attributable to NCI X exist | New entity = economic entity | NOT a JV (needs an acquirer)
Rates at date of transfer Cr COS (P) 96,000 + FCTR on Cash - FV NCI 4. Former owners of combining entity obtain control of combined
NCI of X Co X
Tax Effect Cr Inventory (S) 26,000 = CCE end period - FV PHEI entity Consolidation not required
Dr DTA (inv overstated) = FV trf to obtain Analytical check EA Reverse takeover (RTO)- when former owners of legal entity obtains
Cr Tax expense (s) Tax effect control control over enlarged economic entity (for listing purposes, to pierce the
BVE of Z at end period X
Subseq year realisation of profit: Dr DTA (26K x 20%) 5,200 - CCE acquired corporate veil) | legal entity is not economic entity
+ unamortised balance of intangible asset of Z X
Dr NCI Dr ORE Cr Tax expense (P) 4,800 = Net cash paid Acquisition Method of accounting
Cr COS (P) 24,000 Cr FCTR (G) 400 on acquisition - Unrealised profit of fixed asset at end period (X) 1. Identify the acquirer- IFRS 10 Test of control ( who initiated the
Tax Effect Zs INA at end of period X consolidation, size amongst combining entities, dominance of
Dr Tax Expense (P) Cr ORE Cr NCI EA Entries Cash Balances Ps share of Zs INA @ 30% X management in combined entity, ability to elect directors, who transferred
Subsequent year Downstream Recognise Post-acq RE of Assoc Beg bal of cash + Collections AR - Implicit Goodwill in Investment in Z: cash or issued shares as consideration (except in RTO), who holds the
Dr Investment in A Cr Opening RE FA purchases - AP pmt largest voting rights in combined entity)
Recognise Dividend received - operating Exp Investment in Z at acq date at CR1 X 2. Determine acquisition date date when control is obtained. when
Dr Dividends income Cr Investment in A - interest Exp BV of net assets of Z at acq date X contractual agreement is legally binding
Recognise share of RR (after taxes) tax (aveR) (FV-BV) differences X - NOT date of transfer of consideration
Dr Investment in A reserves increase, CR share div (actual rate) E.g. intangible asset amt (after-tax) 3. Recognise and measure net identifiable assets acquired
Cr Share of current RR Cr RR + FCTR (bal fig between End bal FV of Net assets X 4. Recognise and measure goodwill or gain from bargain purchase
Share of past litigation losses (after-tax) USD and SGD using CR 1) - Share of FV of net assets of Z at acq X residual amt
Provision provided for at date of acq i.e. = End Bal of cash Determining amount of consideration transferred***
+ Goodwill implicit in Investment Z X FV(consideration) = FV(Assets trf) + FV( Liabilities incurred by
reversal entry
Dr Investment in A Cr ORE Analytical check of NCI Bal Investment in Z at end period X acquirer to former owners of acquiree) + FV (Equity interests issued
Adjustment of unrealized profit past years BVE of subsi (closing rate for year) by acquirer) + FV(contingent consideration/(refund))
Dr Opening RE Cr Investment in A past Ave rate include FCTR balance Analytical check on Consolidated RE **All after-tax Contingent consideration
Adj Past COS on undervalued inv after tax + (FV-BV) adj at aft-tax (closing Ps RE at 31 Dec (1) New info change in estimate
Dr ORE Cr Investment in A rate for year) + Ps Share of X post-acq RE (2) Info that existed at acquisition date but was missed or incorrectly
Adj for past depn of undervalued FA after tax - Unrealised profit from upstream + Ps Share of Y post-acq RE indirect interest % applied change in FV applied retrospectively as correction of error
Dr ORE Cr Investment in A sale aft-tax + Ps Share of A post-acq RE **Contingent refund leads to indemnification asset
Share of current profit in Associate = Adj BVE of subsi X 10% NCI Expected value = [P(contingent event occurring) X consideration] +
Use latest ownership % X (End period RE acq RE) Use gain of control %
Dr Investment in A share [P(contingent event not occurring) X 0]
- (Ps share of past cumulative amortn / depn) after-tax
Cr Share of profit in A + goodwill attributable to NCI Fair Value = PV of expected value
or Dr Investment in A (closing rate) + Ps share of claims expensed (use provision amt) discount rate = cost of capital on the entity making outflow
Dr Share of tax in A Cr Share of profit in A = NCI share of Adj BVE of subsi + P share of all other expenses in the past Split the payable as gross amt and unamortised discount
separate tax and NPBT if tax expenses diff + Ps share of COS of undervalued inventory in past Acquisition-related costs- incurred by acquirer expensed off in
Share of FCTR of Associate - Ps share of unrealised interest income consolidated FS (P/L) , NOT IN CONSIDERATION TRANSFERRED
Dr Investment in Associate Cr FCTR (increase in use % after divestment or investment if trxn occurred after E.g. legal costs, due diligence costs, stamp duties
FCTR) - Ps share of unrealised profit after-tax Reduce share capital received from acquiree
Cost of issuing equity- deducted from equity
If Gain or loss of control
Dr Equity Cr Cash (reducing proceeds from share issuance)
+ Remeasurement Gain/ (loss) at grp consol lvl Financing of acquisition
Change in functional Currency If No gain/loss of control still remain as subsi NOT IN CONSIDERATION TRANSFERRED, expensed off
IS: Current & comparative Respective Ave rate + Plug- balancing figure adjusted to capital reserve Cost of issuing debt amortized over life of loan to I/S, increase effective
Statement of changes in Equity P Divestment: (positive plug) e.g. 20% decrease interest rate. Dr Unamortised debt issuance costs Cr Cash
Share Capital All use date of incorporation rate ** If assets transferred or liabilities transferred from acquirer to seller
Reversal of profit on divestment in P legal IS
Bal at End for both yrs use CR FCTR in yr of change = Diff between HR and Rchange as part of consideration re-measure at FV and recognize gain/loss
(One time translation of equity to SGD using rate at date of change) [(sales proceeds Parents investment in S (exclude the post-acq RE that is
in separate FS
RE Deconstruct BS at beg of comparative yr to find RE | Bal 1 Jan + NPAT + FCTR = bal end pr recognised in Group equity)]
(1) Immediately prior to transfer
Bal @ end pr = USD X Rchange differential is FCTR + 20% P share of Post-acq RE up to divestment date Dr Property 2mil Cr Gain on re-measurement (to FV) 2mil
BS: Assets & Liabilities CR @ date of change and @ end of comparative pr (20/90 X P share of subgrp post-acq equity) (2) On transfer
Share cap & RE take from above | FCTR is bal fig = Amt taken to capital reserve Dr Investment 12mil Cr Property 12mil
consideration transferred to existing owners of acquiree
P Increase in Investment: (negative plug) But if trf to acquiree, remeasurement gain/loss not recognized as
Changes in FCTR within period % increase of Ps share in post-acq RE & RR taken over from NCI up to A&L still remain in combined entitys FS
Analysis of movements of P&L
Beg bal 1 Jan X FCTR from BS Intangible assets
Fixed Purchases (Ave, Depn (ave, NC) divestment date of NCI
Translxn Adj in Identifiable non-monetary asset without physical substance. Either:
asset Cash)
yr: (1) Separable or (2) Arise from contractual or legal rights
Beg Bal CR 0 [Additional investment in X by P (consi paid for extra %) E.g. operating lease- contractual legal criterion is met
Purchases Current yr Ave Rate Cash Opening Net X Opening Net Assets X (CR1
- % of equity transferred from NCI to P (Note 1)] ii) customer & subscriber list from acquiree
Assets CR0)
- Depn Current yr Ave Rate NC (decrease in NCI) Recognise separately from goodwill as FV reliably measurable
Income in yr X NPAT USD X (CR1 AveR in
FCTR No rate, Bal figure NC = Loss on purchase (capital reserve) Contingent liabilities and provision
yr)
End Bal CR 1 Recognised in biz combi if: Present obligation arising from past event +
OCI in period
Patents Purchases (Cash) Amortin (ave, NC) FV reliably measurable.
Change in f(x) E.g. Lawsuits are only contingent liabilities if judgement is known, even
Inventory Purchases (ave, cash) COS (ave, NC) currency: though settlement amount is unclear- FV is reliable. Present obligation
AR Sales (save, NC) Collections (ave, Cash) FCTR Adj to X When rate increases, FCTR from past event.
AP Cash pmt (ave, Cash) Purchases (ave, NC) Share Cap increase, put ve sign in this table Control premium = FV consideration paid (% acquired X 100% of value of But if judgement is not out, i.e. occurrence or non-occurrence of one or
P acquires subgroup X and Y | X holds direct interest Y FCTR Adj to RE X When rate increases, FCTR acquiree based on amt of NCI) more future uncertain events not wholly within control of acquiree is
increase, put ve sign in this table Goodwill attributable to NCI (alt 1) = (GW Control premium) X NCI % not recognized by acquirer
 FV INA of X FV INA of Y FCTR adj to OCI X When rate increases, FCTR Goodwill = 100% FV of acquiree + control premium FV INA If something is not contingent liability, captured as goodwill, reducing it
BVE of X on acq date BVE of Y on acq date (P acq) increase, put ve sign in this table Indemnification assets in assets
- Investment in Y + (FV-BV) Adj
1. Construction Contracts Contractual guarantee from former owners to indemnify acquirer in the
Bal @ date of X
+ (FV-BV) Adj e.g. intangible asset (+), change Always ZERO at end of period A) Construction for subsi (downstream) worst case scenario of subsequent loss from a contingency asset or
e.g. intangible asset Provision for claims (-) Current year liability. Measured at FV. Remeasured at the end of each reporting period.
(+), Provision for claims (-) - DTL or + DTA Derecognised when acquirer receives proceeds or loses right to asset.
- DTL or + DTA = FV INA of Y (1) To Eliminate Profit Dr Revenue Cr Expense Cr Construction WIP - Time value of money is recognized, interest expense and interest income
= FV INA of X (2) To eliminate Progress billings and construction WIP to zero and restate recognized on the provision and indemnification asset.
Allocate share of post-acq RE of D to NCI Always have a corresponding contingent liability.
Goodwill for Subgroup Dr ORE Cr NCI Fixed Assets to cost
FV consideration transferred by P for subgrp E.g. Indemnification asset & Provision for license fee
e.g. (3,600,000 X 90/60) if divested to 60%, initially 90%
RE of D at beg of current period - RE of D at date of acq (when D was still an associate) Dr Progress billings Cr Fixed Assets Cr Construction WIP Deferred tax on acquisition
= Change in RE of D X NEW % ownership = Share of Ds change in RE
+ FV NCI of X + FV NCI Y 3. Increase Ownership % Dr Fixed Assets: Billings < Costs | Cr Fixed Assets: Billings > Costs Classification & designation of identifiable assets/liabilities acquired
- FV INA X - FV INA of Y determined by info, conditions and policies of acquirer at acquisition date
Plug (bal fig) to capital reserve | Goodwill no change | Gain or loss on disposal to equity Subsequent years e.g. acquiree may classify a building as fixed asset but acquirer might
= Goodwill for subgroup (can find in just 1 line in CJE1) CJE1 based on old % and figures (GW use residual amt) (1) Eliminate profit at start of year Dr ORE Cr Construction WIP want to rent it out, designate it as investment property on acquisition **
NCI share of GW in X initially NCI share of GW in Y initially CJE2 Effects of increase in CJE3 Allocate Post-acq share RE of X
(2) Eliminate progress billings and construction WIP to zero and restate fixed rmb to multiply by tax rate to find DTA DTL!!
Xs FV FV NCI on acq date (before divestment, initially) investment in X to NCI (use old % Identifiable asset: FV > BV = DTL | FV < BV = DTA
- X NCIs share of FV INA of X Ys FV NCI on acq date Dr NCI 1,087,318 Dr ORE Cr NCI (BS) assets to cost Identifiable liability: FV > BV = DTA | FV < BV = DTL
(10% X 1,560,000) Direct int - Y NCIs share of FV INA of Y Dr Capital Reserve (Equity) 212,682 CJE4 Eliminate div declared by X Dr Constr revenue (for yr) Cr Constr expense(for yr) DTL reduces FV of Identifiable net assets
- X NCIs share of FV INA of Y (30% X 1,283,000) Direct int Cr Investment use % after divestment if div declared recognize on date of acquisition at FV and are FV adj to DTA or DTL
1,300,000 afterwards Cr Constr WIP (amt of Profit for yr) AND.
(7% X 1,283,000) Indirect Int = NCI share of GW in Y already in existence in FS of acquiree.
= NCI share of GW in X
$1.3mil is extra consideration paid for CJE5 Allocate current income of X to Dr Progress billings (Cum) Cr Fixed Assets in Progress Cr Constr WIP Goodwill asset no Deferred taxes as goodwill is residual
20% NCI of X
Do JE for tax effects on the over/understated amt of FA Non-Controlling Interests
Xs NCIs share of post-acq equity of Dr Income to NCI Cr NCI On acquisition date, NCI measured at:
subgrp use % after divestment (1) Fair Value - % X FV of acquiree (as a whole)
CJE 1 Elimination of investment in X and Y X holds Y | All after taxes NPAT of X div from Y = adj NPAT B) Construction for subsi (Upstream) Excludes control premium paid by acquirer to obtain control. Includes
NCI share of post-acq RE of X AC Check of NCI
(figures on acq date, before any change in ownership %)
BVE at 31 dec 20X5 (1) Eliminate profits from dev property (past yr) NCIs share of goodwill in acquiree.
Dr Share Cap X Cr Provision for claims + NCI share of post-acq RE of Y or (2) Proportionate share of FV of INA - % X FV of INA
Dr Share Cap Y Cr DTL for intangible asset - NCI share of past amortisation of + Unimpaired/ unamortised balance of Dr ORE Dr NCI Cr Dev property Excludes NCI share of goodwill in acquiree
Dr RE X Cr Investment in X intangible asset Fixed Assets = Adjusted BVE Tax Effect Goodwill
- NCI share of unrealised profit of Y X 5% (new NCI % after divestment) premium paid for synergies | Values depend on alternative in calculating
Dr RE Y Cr Investment in Y
= NCI share of Subgrp post-acq equity = NCI share of BE + NCI Goodwill Dr DTA Cr Opening RE Cr NCI
Dr RR Y Cr NCI X NCI | expectation of future economic benefits, integral to entity as a whole,
Dr Intangible Asset Cr NCI Y 319,548 = NCI at end of year (2) Eliminate Construction Revenue not separable | Unidentifiable asset (should not include unrecognized
Dr Goodwill use initial amts for NCI initially holds 30% Dr Construction Revenue Cr Constr Expense Cr Dev property identifiable A&L measurement errors) | Overpayment is not substantiated
Dr DTA for provision of claims NCI & Investment bef change Decrease in 2/3 of NCI share AC using latest ownership interests by future economic benefits- gives rise to day 1 impairment losses,
listings Tax Effect
1. Loss of control Subsi become assoc recognize immediately
CJE1 Same, but only eliminate existing subsidiaries. Ignore the assoc 20% of initial FV NCI in X due to post-acq change in RE or Dr DTA Cr Tax Expense Core Goodwill or Internally generated goodwill: Synergies of acquirees
GW excludes what it used to have in assoc 874,286 equity taken over from NCI (20%) (3) Eliminate WIP and Progress Billings assets, FV of acquiree > FV acquiree net assets
(20/30 X 1,311,429 total FV NCI Can be due to changes in RE, RR Fair Value of Synergies or Combination Goodwill: Synergies among
Group Legal Dr Progress Billing Cr WIP
including GW) Negative fig as RE is made up of grp entities, FV of grp > sum of indiv entities Alt 1 include NCI share of
Proceeds on sale of 20% 700,000 700,000
+ 20% share NCI post-acq equity historical profits that are at a lower % since the property is overstated, there will be tax effects on it goodwill Alt 2 Exclude NCI share of goodwill
+ FV of retained int (40%) 1,400,000 213,032 than after increase in % invested. Gain on Bargain Purchase / Negative Goodwill Due to fire sales or
+ FV of consideration transferred (1,800,000) 1,800,000 X (20/60) (20/30 X 319,548) If taken to RE instead of capital distress sales
= (600,000) = 20% of equity trf by NCI to P Co reserves, will bal with listings but RE is a 2. Capitalisation of borrowing costs FRS 103: Reassess measurement and recognition of critical variables
+ Ps share of post-acq change in (280,000) 1,087,318 historical compilation of profits, not to be For Subsi (consi trf | FV INA | FV NCI | FV previously acquired interests) if no
equity Add. investment in X adj retrospectively (same for OCI) errors, recognise gain on bargain purchase in PL
= Profit recognised on date of sale 20,000 100,000 another method is layering of RE A) Eliminate interco interest pmt Upstream pmt
1,300,000 NCI can be debit balance
- Acquisition of equity from NCI using ownership % applicable at that Dr Interest Income (Subsi lender) Cr Interest Expense (P- lendee) FRS 110: When losses > share cap due to insolvency or bankruptcy
Group Profit on sale Grp remeasurement (1,087,318) point in time B) Capitalise Interest expense into FA prospective application | FRS 27 (bef 2009) NCI cannot be debit bal,
gain (remaining 40%) = Loss on purchase to cap resr unless NCI has binding obligation to make good losses
Dr Fixed Assets in Progress Cr Interest Expense
(of 20%) 212,682 Reverse Acquisition (RTO) Legal subsi acquired = acctg parent that
Proceeds on sale of 20% 700,000 Can combine elimination of interest pmt and capitalization amt into composite JE has control | Backdoor listing | Liquidity in shares for existing shareholders
FV of retained int (40%) 1,400,000 Loss on purchase Gain on purchase (Interest expense increases FA, Int income decrease) | Share exchange - ex private owners have control | Initiated by private
firm for public co to acquire it | No NCI afterwards, 100% acquired | owners
FV of consideration 1,800,00 X (20/60) 1,800,000 X (40/60) Dr NCI Dr NCI Capitalise interest expense during period when FA is built!!!! of private co owns controlling interest | Size and ops of parent smaller
Dr Loss on purchase (equity) Bal Cr Gain on purchase (equity) Balancing fig
transferred = (600,000) = (1,200,000)
Cr Investment in S Cr Investment in S After construction is completed, no need to capitalize the interest expense or amt than sub | Public co issues new shares to private owners
Ps share of post-acq (280,000) X 20/60 (280,000) X 40/60 (Extra amt paid to acquire more %) (to eliminate add. investment) owed into the FA. Do simple elimination in (A) FV consi in share exchange: see which FV measure more reliably
change in equity = (93,333) = (186,667) (Extra amt paid to acquire more %) measured
P & L Effect 6,667 133,333 Biz Combi outside of FRS 103 no consolidation JV 50-50 equity
For Associate e.g. A pays P interest pmt for loan. A uses loan for FA ownership, unanimous decision-making | Acquisition of assets | combi of
During Year of loss of control: NCI Decrease amt
A) Adj for past depreciation in unrealized profit in FA biz under common control
Dr Investment (FV of retained interests CA of retained interests) Initial FV of NCI (CJE1) + change in RE to NCI (CJE2) Common Control: All combining entities ultimately controlled by same
1,4000,000- 1,200,000 = 200,000 = NCI balance X % of NCI acquired by P Use diff in depn amt between P and A party bef and aft biz combi/ restructuring and control is not transitory no
Dr Profit on Sale (difference between legal and group profit) = 20% equity of X transferred to P from NCI (Note 1)
100,000 6,667 = 93,333 B) Adjust for unrealized profit in FA owned by A acctg std for this Pooling-of-int method
Gain/loss on purchase Assets & liab included in FS at BV, historical amts | FS as if restructuring
Cr Remeasurement gain (Group remeasurement gain) 13,333 = Consi paid for extra % - FV of extra % of NCI Dr ORE Cr Investment in A had occurred at the beg of the earliest period to reflect economic
Cr ORE (Group post-acq change in equity) 280,000 = $2mil ($3mil X 5/10) = $500k (paid more for %, loss) substance of combined enterprise
Subsequent years for loss of control:
Dr Investment 200,000
4. P decreases ownership from 90% to 70% Amortisation of bonds sold from Parent to Subsi Control through subsi: Not based on effective interest held, add up subsi
Goodwill no change | No loss of control equity trxn % to determine, then find (100% - eff int) to allocate NCI share of profit
Cr ORE 200,000
CJE1 based on old % and fig (GW use residual amt) Intermediate parent exempted sub-consol all conditions met FRS 110
CJE2 Effects of decrease in investment in subgroup (% are before divestment of P) P is wholly owned/ partially-owned S of another entity and owners do not
2. Gain of control rate when control was obtained
Dr Investment 914,286 (a) object to P not presenting conso FS | Ps D/E instru not publicly traded | P
CJE 1, same but now includes all share cap, RE, RR, NCI and investment in
Dr ORE 185,714 (b) did not file & not in process of filing its FS with any reg org for issuance
new subsi Goodwill now includes the new subs
Cr Cap reserve (equity) 37,106 (c) any class of instru in public mkt | Ultimate or intermediate P produce FS for
Use FV PHEI X Rate at when control was obtained public use whr subsi are consolidated and measured at FVTPL
Cr NCI 1,062,894 (d)
FV of consi transferred + FV PHEI + FV NCI - FV INA = GW of new subsi Investment entity exempted from consolidation FVTPL FRS 39
Ps share of Post-acq RE of X and Y
NEW Total GW = Goodwill of subgroup + new subsi Biz purpose: Obtain funds from investors & provide investment mgmt. svc
During Year of Gain of control: + Ps share of past claims expensed (aft tax)
Gain of control in D Co - Ps share of unrealised profits Returns: Commit to investors that biz purpose to invest funds solely for
Dr Investment (700,000 320,000) 380,000 = Ps share of subgroups post-acq equity returns from cap appreciation, investment income or both e.g. div, interest,
(FV of previously held interest initial cost of investment) 668,736 rental income
Cr Remeasurement Gain 100,000 FV focus: Measure & eval perf of substantially all investments on FV
Cr ORE 280,000 basis
20% of initial investment in X 914,286
(Re-enact Ps share of post-acq change in equity) Control: (1) Power: Through contracts & shares | rights to direct activities
(20/70 X initial cost 3.2mil) (a)
Group substantive instead of protective | Protective: approve cessation, restrict
+ 20% of Ps share of post-acq change in equity 148,608 (20/90 X P share of subgrps post-acq
FV of previously-held interests (40%) 700,000 equity 668,736) div paid | Substantive: Alter cap structure, acq or disposal of int in any biz
- Initial investment in 40% of D Co (320,000) etc | Key board rep active strategic mgmt roles | Potential voting rights -
= 20% of equity in X trf to NCI 1,062,894 (d) Cash Interest: coupon rate % X Principal Amt warrants (2) Exposed to variable returns: current access to returns
- P Cos share of post-acq change in equity of D (till date of (280,000)
gain of control) Effective interest: End of last yr CA X effective rate % associated w ownership interests (3) Ability to use power to affect
Parents PL Group equity returns: past or future intention to exercise this power currently
Remeasurement gain (on date of gain of control) 100,000 Sales Proceeds 1,100,000 1,100,000 Amortisation = Diff between Cash and Effective Interest exercisable, intention not impt | Fin & legal ability
Investment in S (914,286) (a) (1,062,894) (d) Carrying Amount = Initial investment amt + Amortisation amt Acctg treatment should be consistent with Biz rationale | Contractual
Subsequent years after Gain of control:
Remeasurement Gain in previously held interests Profit 185,714 (b) 37,106 (c) Profit on sale of bonds = Sales Proceeds Carrying Amt (Has tax effect) terms protective legally can be considered substantive for actg purpose
*Only the group recognises cap reserve equity at consol level | Consider activity & objective of entity
Dr Investment (700,000 320,000) 380,000 Interest Income Differential = Diff between 2 coys Effective Interest recorded When fin arrangement and biz acq nego tgt, may be linked tgt for acctg
Cr ORE 380,000 Parents books only PL is affected
CJE3 Allocate Post-acq share RE of X to NCI (% before divestment to P) (Has tax effect) purposes | Corresponding gain/loss in IS should be supported by biz
CJE4 Eliminate div declared by X use % after divestment if div declared afterwards Both affect current profit and loss circumstances & commercial reality
CJE5 Allocate current income of X to NCI of X CANNOT use face value of bond as FV of consi E.g. bond issued in
Dr Income to NCI Cr NCI use % after divestment NPAT of X div from Y = adj NPAT connection with biz acq. Inappropriate to regard issuance of bond as a
Plug (bal fig) to capital reserve separate financing arrangement
Reversal of profit on divestment of 20% to Ps PL (185,714) (b)
20% of Ps share of post-acq change in equity up to 148,608
divestment date (Note 1)
= Amt taken to cap reserv (37,106)
(Note 1) Positive figure, as AC uses latest ownership 70% which is lower than historical 90%
profits reversal of profits is hence a positive figure