1. Advanced Financial Accounting Lecture-38

2. Question Balance Sheet as 31 st December 2008 H (Rs)S (Rs) Fixed assets1,000450 Investment in S.550--- Current assets350150 Total assets1900600 Share capital1200300 Reserves600200 Current liabilities100 Total liabilities & equities1900600 The Holding Co.(H) acquired 80% share of the Subsidiary Co. (S) on 31 st December 2008. Required: Prepare the Consolidated Balance Sheet as at 31 st December 2008.

3. Working 240 / 300 x 100 = 80%

4. Working Cost of investment 550 Less Owner’s equity (500 x 80%)400 Goodwill150

5. Working Holding Co. (Rs) 80% Minority (Rs) 20% (450 x 80%) 360 (150 x 80%) 120 480 (100 x 80%) (80) 400 (450 x 20%) 90 (150 x 20%) 30 120 (100 x 80%) (20) 100

6. Solution Consolidate Balance Sheet As 31 st December 2008 Rs. Fixed Assets1450 Goodwill.150 Current Assets500 Total2100 Share Capital1200 Reserves600 Minority Interest100 Current Liabilities200 2100

7. Balance Sheet As 31 st December 2008 HS Rs. Fixed Assets1,000450 Investment in S.500--- Current Assets400150 Total1900600 Share Capital1200300 Reserves600200 Current Liabilities100 Total1900600 The Holding Co.(H) acquired 80% shares of the Subsidiary Co. (S) on 31 st January 2008 when it’s reserves were worth Rs.120. Goodwill impaired up to Rs.33 during the year. Required: Prepare the Consolidated Balance Sheet as at 31 st December 2008.

8. Steps 1.Calculate holding and minority percentage 2.Identify pre and post acquisition elements in owner’s equity of subsidiary Co. 3.Calculate goodwill 4.Calculate group reserve 5.Calculate minority interest

9. Steps-1 Holding = 80% Monitory = 20%

10. Steps-2 Pre-acquisitionPost-acquisition Capital 3000 Reserves 12080 Total 42080

11. Steps-3 Goodwill Cost of investment in subsidiary Co. 500 Less Pre-acquisition of OE of subsidiary Co. (420x80%)336 Goodwill164 Less Goodwill impairment 33 131

12. Steps-4 Group Reserves All reserves of parent Co. 600 Post acquisition of subsidiary Co. (80x80%) 64 Impairment loss (33 ) 631

13. Working TotalPre- acquisiti on Post- acquisiti on Owner’s equity 50042080 80%(400)(336)(64) 20%10084016

14. Solution Consolidate Balance Sheet As 31 st December 2008 H Rs. Fixed Assets (1,000 +450)1450 Goodwill.131 Current Assets (400 + 150)550 Total2131 Share Capital1200 Reserves631 Minority Interest100 Current Liabilities200 2131

15. Question Balance Sheet As 31 st December 2008 HS Rs. Fixed Assets1,000450 Investment in S.500 Dividend Receivable40 360 Other Current Liabilities Total Current Assets400150 Total1900600 Share Capital1200300 Reserves600200 Dividend Payable70 30 Other Current Liabilities Current Liabilities100 Total1900600 The Holding Co.(H) acquired 80% shares of the Subsidiary Co. (S) on 31 st January 2008 when it’s reserves were worth Rs.120. Goodwill impaired upto Rs.33 during the year. Required: Prepare the Consolidated Balance Sheet as at 31 st December 2008.

16. Consolidate Balance Sheet as 31 st December 2008 H Rs. Fixed Assets (1000 + 450)1450 Goodwill.131 Current Assets (360+150)510 Total2091 Share Capital1200 Reserves631 Minority Interest100 Other Current Liabilities80 Dividend Payable by H70 Dividend due to monitory10 Current Liabilities160 2091