Presentation is loading. Please wait.

Presentation is loading. Please wait.

E-14 Advanced Accounting and Financial Reporting

Similar presentations


Presentation on theme: "E-14 Advanced Accounting and Financial Reporting"— Presentation transcript:

1 E-14 Advanced Accounting and Financial Reporting
Lecture-09 & 10 1-Apr-17 E-14 Advanced Accounting and Financial Reporting Lecture 09 & 10 Complex Groups, Piecemeal Acquisition and Disposal of SubsidiaryIAS 7 Consolidated Statement of Cash Flows Sajid Shafiq, ACA CSCF, Complex Group, PM acquisition and Disposal E

2 Consolidated Statement of Cash Flow
The method of preparation is the same as for the individual company statement of cash flow but additional cash flows may arise as follows: Dividends paid to Non Controlling Interest Dividends received from Associate Cash consequences of Acquisition or Disposal of Subsidiaries CSCF and Complex Groups

3 Non Controlling Interest Investment in Associate (IIA)
Rs Dividend to NCI (Balancing figure) xxx B/f (NCI- as per CSFP) (Dividend Payable to NCI-as per CSFP) % age of S’s Total Comprehensive Income* (as per CSCI) * Profit, revaluation, translation reserve etc. Investment in Associate (IIA) Rs B/f (IIA- as per CSFP) (Dividend Receivable from A) Xxx Dividend from A (Balancing figure) xxx % age of S’s Total Comprehensive Income* (as per CSCI) C/f (IIA- as per CSFP) * Profit, revaluation, translation reserve etc. CSCF and Complex Groups

4 CSCF and Complex Groups

5 CSCF and Complex Groups

6 Acquisition and disposal of Subsidiary
Cash flows are reported net of cash given up or acquired with the subsidiary CSCF and Complex Groups

7 Acquisition and disposal of Subsidiary
Each of the individual net assets of a subsidiary acquired/disposed of during the period must be excluded when comparing group balance sheets for CF calculations. Subsidiary acquired in the period Subsidiary sold in the period SUBTRACT inventory, receivables, payables etc. at the date of acquisition from the movement on these items when calculating the cash flows ADD inventory, receivables, payables etc. at the date of disposal from the movement on these items when calculating the cash flows CSCF and Complex Groups

8 Example: acquisition during the year
CSCF and Complex Groups

9 CSCF and Complex Groups

10 Disposal during the year
CSCF and Complex Groups

11 Disposal during the year
CSCF and Complex Groups

12 Consolidation of Complex Group
Multiple Subsidiaries Groups involving Sub-subsidiaries Groups involving Sub-Associates CSCF and Complex Groups

13 Consolidation of Complex Group
Multiple Subsidiaries The fundamental technique remains same except that Now there will be multiple calculations of Goodwill Non-Controlling Interest, & Share in Post acquisition retained earnings for Consolidated Retained earnings CSFP will show a single(combined) figure of GW and NCI. A NGW will not be off set against GW, however. CSCF and Complex Groups

14 Consolidation of Complex Group
Multiple Subsidiaries Example P acquired 80% shareholding in S two years ago when S’s reserves stood 700. P also acquired 90% shares in T when its reserves stood 400 one year ago. Required: Prepare Consolidated SFP at 31 Dec 08 31 December 2008 P S T Cost of investment –S –T 800 400 Other net assets 600 1,100 1,800 Share Capital 200 100 Retained Earnings 1,600 1,000 500 CSCF and Complex Groups

15 Consolidation of Complex Group
Multiple Subsidiaries Solution P Group Consolidated SFP at 31 December 2008 CSCF and Complex Groups

16 Consolidation of Complex Group
Multiple Subsidiaries Solution Subsidiaries’ Net assets summary CSCF and Complex Groups

17 Consolidation of Complex Group
Consolidated Retained Earnings Multiple Subsidiaries Solution Goodwill Non Controlling Interest CSCF and Complex Groups

18 Consolidation of Complex Group
Groups involving Sub-subsidiaries-Vertical CSCF and Complex Groups

19 Consolidation of Complex Group
Groups involving Sub-subsidiaries-Mixed(‘D’) CSCF and Complex Groups

20 Consolidation of Complex Group
Groups involving Sub-subsidiaries-Rules -For control, Actual %ages -For GW, NCI, Consolidated RE, effective SH -Cost of Investment in Sub-subsidiary is %age investment in Subsidiary -Acquisition date with reference to “Ultimate” Parent is relevant Dividend by Sub-subsidiary is accounted for using ‘Actual’ and not effective SH CSCF and Complex Groups

21 Consolidation of Complex Group
Groups involving Sub-subsidiaries- Example P bought 70% of S 2 years ago when S’s reserves stood 500. Later(1 year ago) S bought 60% of T when T’s retained earnings were 200. The companies declared following dividends: P---150, S---100, T—80 Required: Prepare Consolidated SFP 31 December 2008 P S T Cost of investment –S –T 700 450 Other net assets 1,100 900 600 1,800 1,350 Share Capital 200 100 Retained Earnings 1,600 1,250 500 CSCF and Complex Groups

22 Consolidation of Complex Group
Groups involving Sub-subsidiaries- Solution Group Structure: CSCF and Complex Groups

23 Consolidation of Complex Group
Groups involving Sub-subsidiaries- Solution P Group Consolidated SFP as at 31 December 2008 CSCF and Complex Groups

24 Consolidation of Complex Group
Groups involving Sub-subsidiaries- Solution Net Assets Summary CSCF and Complex Groups

25 Consolidation of Complex Group
Groups involving Sub-subsidiaries- Solution Goodwill: Non Controlling Interest: Consolidated Retained Earnings: CSCF and Complex Groups

26 Consolidation of Complex Group
Groups involving Sub-Associates Here two tier approach is followed i.e. First consolidate sub-associate under equity method in the books of Subsidiary Then consolidate as normal CSCF and Complex Groups

27 Piecemeal acquisition and Disposal

28 Piecemeal acquisition and Disposal
Where acquisition does not change control Where acquisition does change control A business combination achieved without the transfer of consideration Disposal Where disposal does not change control Where disposal does change control Deemed Disposal CSCF and Complex Groups

29 Piecemeal acquisition and Disposal
Piecemeal acquisition- Where acquisition does not change control e.g. earlier 60%, later 80% Goodwill will NOT be re-measured due to subsequent acquisition The difference between change in NCI at the date of subsequent acquisition and Cost of subsequent investment will be taken directly to equity CSFP will be prepared as per shareholding existing at consolidation date CSCI will be prepared having regard to status of investment CSCF and Complex Groups

30 Piecemeal acquisition and Disposal
Piecemeal acquisition- Where acquisition does not change control Example 31 December 2008 P(000) S(000) Cost of investment –S 400 Other net assets 600 550 1,000 Share Capital 200 100 Retained Earnings 800 450 P acquired its holding in S as follows: Date Prop acq Cost of inv S’s ret earngs 30 Sep 2007 60% 255,000 300,000 1 July 2008 20% 145,000 390,000 The PAT for year ended 31 Dec 2008 of P and S were 200,000 and 120,000 respectively Required: Prepare Consolidated SFP and CSCI extract CSCF and Complex Groups

31 Piecemeal acquisition and Disposal
Piecemeal acquisition- Where acquisition does not change control Solution P Group Consolidated SFP at 31 December 2008 CSCF and Complex Groups

32 Piecemeal acquisition and Disposal
Piecemeal acquisition- Where acquisition does not change control Solution Net Asset’s summary CSCF and Complex Groups

33 Piecemeal acquisition and Disposal
Piecemeal acquisition- Where acquisition does not change control Solution Goodwill Non Controlling interest Consolidated Retained Earnings P’s Retained earnings Share in S’s post acquisition retained earnings 60% of post(1st) acquisition 20% of post(subsequent) acq. Cost of subsequent investment Less Change in NCI (including attributable GW) at subsequent acq date CSCF and Complex Groups

34 Piecemeal acquisition and Disposal
Piecemeal acquisition- Where acquisition does not change control Solution P Group Consolidated SCI for year ended 31 Dec 2008(extract) Profit after Tax Attributable to: Owners of the Parent Non Controlling Interest CSCF and Complex Groups

35 Piecemeal acquisition and Disposal
Piecemeal acquisition-Where acquisition does change control Possible Scenarios: From simple investment(10%) TO Subsidiary (60%) From Associate (30%) TO Subsidiary (60%) CSFP and CSCI will be prepared as usual. Goodwill, however, be calculated as follows: The previous investment will be re-measured at FV with resulting gain-loss in profit and loss Goodwill will now be calculated with reference to combined Cost of investment (FV of previously held plus cost paid for subsequent investment) CSCF and Complex Groups

36 Piecemeal acquisition and Disposal
Apr-17 Piecemeal acquisition and Disposal Piecemeal acquisition-Where acquisition does change control Example P acquired following shares in S on different dates Required: Calculate goodwill the above case. Date Prop acq Cost of inv S’s net assets 30 Sep 2007 40% 200,000 300,000 1 July 2008 20% 160,000 400,000 CSCF and Complex Groups CSCF, Complex Group, PM acquisition and Disposal E

37 Piecemeal acquisition and Disposal
Piecemeal acquisition-A business combination achieved without the transfer of consideration Circumstances include: The acquiree repurchases a sufficient number of its own shares for an existing investor (the acquirer) to obtain control. Minority veto rights lapse that previously kept the acquirer from controlling an acquiree in which the acquirer held the majority voting rights. The acquirer and acquiree agree to combine their businesses by contract alone. The acquirer transfers no consideration in exchange for control of an acquiree and holds no equity interests in the acquiree, either on the acquisition date or previously. In a business combination achieved by contract alone, the acquirer shall attribute to the owners of the acquiree the amount of the acquiree’s net assets recognized in accordance with this IFRS. In other words, the equity interests in the acquiree held by parties other than the acquirer are a non-controlling interest in the acquirer’s post-combination financial statements even if the result is that all of the equity interests in the acquiree are attributed to the non-controlling interest. CSCF and Complex Groups

38 Piecemeal acquisition and Disposal
Disposal Where disposal does not change control e.g. earlier 80%, later 60% On disposal No Gain or loss on disposal shall be calculated for group GW will NOT be re-measured The difference between change in NCI at the date of disposal and disposal proceeds will be taken directly to equity CSFP will be prepared as per shareholding existing at consolidation date CSCI will be prepared having regard to status of investment CSCF and Complex Groups

39 Piecemeal acquisition and Disposal
Disposal Where disposal does not change control Example 31 December 2008 P(000) S(000) Cost of investment –S (80%) 400 Other net assets 600 550 1,000 Share Capital 200 100 Retained Earnings 650 450 Suspense account 150 P acquired S two years ago when its reserves stood 300,000. On 31 March 2008, it sold 20% shares (i.e. retaining 60%) for 150,000 which have been credited to suspense account. The PAT for year ended 31 Dec 2008 of P and S were 200,000 and 60,000 respectively. Required: Prepare Consolidated SFP and CSCI extract CSCF and Complex Groups

40 Piecemeal acquisition and Disposal
Disposal- Where disposal does not change control Solution P Group Consolidated SFP at 31 December 2008 CSCF and Complex Groups

41 Piecemeal acquisition and Disposal
Disposal- Where disposal does not change control Solution Net Asset’s summary CSCF and Complex Groups

42 Piecemeal acquisition and Disposal
Disposal- Where disposal does not change control Solution Goodwill Non Controlling interest Consolidated Retained Earnings P’s Retained earnings Share in S’s post acquisition retained earnings 80% of post acquisition till disposal date 60% of RE subsequent to disposal. Sale proceed of investment Less Change in NCI (including attributable GW) at disposal date CSCF and Complex Groups

43 Piecemeal acquisition and Disposal
Disposal- Where disposal does not change control Solution P Group Consolidated SCI for year ended 31 Dec 2008(extract) Profit after Tax Attributable to: Owners of the Parent Non Controlling Interest CSCF and Complex Groups

44 Piecemeal acquisition and Disposal
Disposal -Where disposal does change control Possible Scenarios: From subsidiary TO full disposal From subsidiary (60%) TO simple investment(10%) From Subsidiary (60%) TO Associate (30%) CSFP and CSCI will be prepared as usual. Gain-loss on disposal, measured as follows, shall be taken to PL account: Sum of [sale proceeds and FV of portion retained at disposal date] LESS Goodwill(combined i.e. including share of NCI) Net assets of subsidiary at the date of disposal NCI in subsidiary at the date of disposal including attributable GW CSCF and Complex Groups

45 Piecemeal acquisition and Disposal
Disposal-Where disposal does change control Example P acquired 80% shares of S on 1 December 2007 for 800,000 when S’s net assets stood 800, months later, P sold its 60% shares (i.e. retaining 20%) for 1,200,000 when S’s net assets were 1,000,000. Required: Calculate gain-loss on disposal. CSCF and Complex Groups

46 Piecemeal acquisition and Disposal
Disposal-Where disposal does change control Solution Sale Proceed ______ FV of portion retained ______ _____ Less: Goodwill (Combined) ______ Net assets of S on disposal ______ Less Non Controlling Interest before disposal date, including GW ( ) _____ CSCF and Complex Groups

47 Piecemeal acquisition and Disposal
Disposal –Deemed Disposal Circumstances include: The acquiree issues a sufficient number of its shares to a new investor. Minority veto rights come into effect that keeps the acquirer from controlling an acquiree in which the acquirer held the majority voting rights. The acquirer and acquiree agree to end their business combination and quit the contract The rules relating to calculation of Gain-loss depend whether or not there is a change in control as discussed above. CSCF and Complex Groups


Download ppt "E-14 Advanced Accounting and Financial Reporting"

Similar presentations


Ads by Google