Chapter 5

CHAPTER 5
IFRS 10 CONSOLIDATION OF PARENT AND SUBSIDIARY

DEFINITIONS
Consolidated financial statements are the financial statements of a group presented as those of a
single economic entity.
A group is a parent and all its subsidiaries
A parent is an entity that has one or more subsidiaries.
A subsidiary is an entity, including an unincorporated entity such as a partnership that is controlled by
another entity (known as the parent).
Investment entity an entity that: a)
Obtains funds from one or more investors for the purpose of providing investors with investment
management services.
b)
Commits to its investors that its business is to invest funds solely for returns from capital
appreciation, investment income or both, and
c)
Measures and evaluates the performance of substantially all of its investments on a fair value
basis.
SCOPE
A parent, other than a parent exempt under this IAS, shall present consolidated financial statements in
which it consolidates its investments in subsidiaries in accordance with this Standard.
A parent need not present consolidated financial statements if and only if:
(a)
the parent is itself a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity
and its other owners, including those not otherwise entitled to vote, have been informed about,
and do not object to, the parent not presenting consolidated financial statements;
(b)
the parents debt or equity instruments are not traded in a public market (a domestic or foreign
stock exchange or an over-the-counter market, including local and regional markets);
(c)
the parent did not file, nor is it in the process of filing, its financial statements with a securities
commission or other regulatory organization for the purpose of issuing any class of instruments in
a public market; and
(d)
the ultimate or any intermediate parent of the parent produces consolidated financial
statements available for public use that comply with International Financial Reporting Standards.
An entity is not required to consolidate it post employment benefit plans or other long-term employee
benefit plans to which IAS 19 applies.
An investment entity shall not consolidate its subsidiaries or apply IFRS 3, instead measure these
investments at fair value through profit or loss account.
CONSOLIDATION PROCEDURES
Consolidated financial statements:
(a)
combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent
with those of its subsidiaries.
(b)
offset (eliminate) the carrying amount of the parents investment in each subsidiary and the
parents portion of equity of each subsidiary (IFRS 3 explains how to account for any related
goodwill).
(c)
eliminate in full intra-group assets and liabilities, equity, income, expenses and cash flows relating
to transactions between entities of the group (profits or losses resulting from intra-group
transactions that are recognized in assets, such as inventory and fixed assets, are eliminated in
full). Intra-group losses may indicate an impairment that requires recognition in the consolidated
financial statements. IAS 12 Income Taxes applies to temporary differences that arise from the
elimination of profits and losses resulting from intra-group transactions.
Uniform accounting policies
If a member of the group uses accounting policies other than those adopted in the consolidated
financial statements for like transactions and events in similar circumstances, appropriate adjustments
are made to that group members financial statements in preparing the consolidated financial
statements to ensure conformity with the groups accounting policies.
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Measurement of Assets and Liabilities and related Incomes and Expenses

An entity includes the income and expenses of a subsidiary in the consolidated financial statements
from the date it gains control until the date when the entity ceases to control the subsidiary. Income
and expenses of the subsidiary are based on the amounts of the assets and liabilities recognized in the
consolidated financial statements at the acquisition date.
For example, depreciation expense recognized in the consolidated statement of comprehensive
income after the acquisition date is based on the fair values of the related depreciable assets
recognized in the consolidated financial statements at the acquisition date.
Potential voting rights
When potential voting rights, or other derivatives containing potential voting rights, exist, the proportion
of profit or loss and changes in equity allocated to the parent and non-controlling interests in preparing
consolidated financial statements is determined solely on the basis of existing ownership interests and
does not reflect the possible exercise or conversion of potential voting rights and other derivatives,
unless paragraph B90 applies.
In some circumstances an entity has, in substance, an existing ownership interest as a result of a
transaction that currently gives the entity access to the returns associated with an ownership interest. In
such circumstances, the proportion allocated to the parent and non-controlling interests in preparing
consolidated financial statements is determined by taking into account the eventual exercise of those
potential voting rights and other derivatives that currently give the entity access to the returns.
Reporting date
The financial statements of the parent and its subsidiaries used in the preparation of the consolidated
financial statements shall have the same reporting date. When the end of the reporting period of the
parent is different from that of a subsidiary, the subsidiary prepares, for consolidation purposes,
additional financial information as of the same date as the financial statements of the parent to enable
the parent to consolidate the financial information of the subsidiary, unless it is impracticable to do so.
If it is impracticable to do so, the parent shall consolidate the financial information of the subsidiary
using the most recent financial statements of the subsidiary adjusted for the effects of significant
transactions or events that occur between the date of those financial statements and the date of the
consolidated financial statements. In any case, the difference between the date of the subsidiarys
financial statements and that of the consolidated financial statements shall be no more than three
months, and the length of the reporting periods and any difference between the dates of the financial
statements shall be the same from period to period.
Non-controlling interests
An entity shall attribute the profit or loss and each component of other comprehensive income to the
owners of the parent and to the non-controlling interests. The entity shall also attribute total comprehensive income to the owners of the parent and to the non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
If a subsidiary has outstanding cumulative preference shares that are classified as equity and are held
by non-controlling interests, the entity shall compute its share of profit or loss after adjusting for the
dividends on such shares, whether or not such dividends have been declared.
CONSOLIDATION PROCEDURE ILLUSTRATED
Group has no books of account as a whole:
Parent has its own books of accounts
Subsidiary has its own books of accounts
Each company prepares their own Financial Statements

In consolidation, we add up the financial statements of both companies
Reasons for consolidation:
Parent company controls the subsidiary hence they decide the subsidiarys policies (stewardship
efficiencies, and inefficiencies)
Sales of financial instruments to special purpose entities (IAS-39) e.g. factoring, assignment etc
Related party relationship may affect the financial statements of individual entities.
Decision to invest in group requires the detail of the performance of group as a whole.
METHOD OF CONSOLIDATION
Purchase method is based on the concept of single economic entity.
Single economic entity results in elimination of:
Page 2 of 43
Investment in subsidiary shown in parent company Financial Statements
Share Capital of subsidiary

Intra group balances payables and receivables
Loans and advances between parent and subsidiary
Intra group trading sale and purchase
Gain on Sale and purchase of fixed assets and inventory (opening and closing both), however,
losses on sale or purchase are assumed to be impairment losses and need not be eliminated.
Interest and dividend from S Co
The resultant deferred tax arising on temporary differences because of elimination of profits /
gains on intra-group transactions will be recognized.
The consolidated financial statements will be prepared using same accounting policies for like
transactions.
The purchase method of accounting has the following steps: -
Determination of cost
of investment
Determination of Fair
value of net assets of
subsidiary company
IFRS 3 Date of
acquisition accounting
Identification of date of
acquisition
Calculation of goodwill
at date of acquisition
Determination of value
of NCI at date of
acquisition, if partially
owned subsidiary
Group Goodwill
Full goodwill
NCI is recognized at
Fair Value
NCI is recognized at
proportionate share of
net assets
DEALING WITH THE STATEMENT OF FINANCIAL POSITION

Consolidation Procedures for Basic Consolidation
1.
Prepare the following working notes:
Working Note 1 for group structure, identification of percentage holding by the parent
company
Working Note 2 for cost of control (to calculate goodwill only group share of Goodwill)
Working Note 3 for Non-controlling Interest (if applicable i.e. where the holding by the parent
is less than 100% but more than 50% in subsidiary company)
Working Note 4 for Subsidiary Reserves by identifying Pre and Post acquisition reserves
Working Note 5 for Consolidated Reserves
Note separate working should be prepared for each reserve of subsidiary and parent
because similar reserve will be added with similar reserve.
2.
Add all non-adjusting items line by line except cost of investment appearing in P. Co and share
capital of S. Co.
3.
Make all necessary adjustments discussed on next pages.
4.
Balance all working accounts and place the balances in the statement of financial position
1.
Investment in subsidiary company
This balance is eliminated from statement of financial position and incorporated in the
calculation of goodwill.
Page 3 of 43
Entry:
Debit: Cost of control account
Credit: Investment in subsidiary
2.
Share capital of subsidiary company
3.
Subsidiary company reserves

First split reserves into post and pre acquisition reserves because both have different treatment,
and also before the following entries, make necessary adjustments to the both types of reserve.
Example 1 Acquisition of wholly owned subsidiary

On 31st December 20X1 P purchased the entire share capital of S for Rs. 40,000. The individual
statements of financial positions of P and S at that date were as follows: Statement of financial positions at 31 December 20X1
P
S
Rs.000 Rs.000
Non-current assets
120
40
Investment in S at cost
40
Current assets
40
10
Total assets
200
50
Ordinary share capital (Rs.1 shares)
100
30
Retained earnings
50
10
Current liabilities
50
10
Total equity and liabilities
200
50
Required: Prepare consolidated statement of financial position as at December 31, 20X1?
Page 4 of 43
Example-2 Reserves (Pre-acquisition and post acquisition)

Statement of financial positions at 31 December 20X4
P
S
Rs.000 Rs.000
Non-current assets
50
40
70
Current assets
30
40
Total assets
150
80
100
50
Retained earnings
30
20
Current liabilities
20
10
150
80
You are further informed that P acquired all the shares in S on 30 June 20X4 when the retained
earnings of S amounted to Rs.15,000.
Treatment of impairment loss on goodwill
Example 3
Non-controlling interest
Non-current assets
Current assets
Total assets
Retained earnings
Current liabilities
4.
P
Rs.000
50
70
30
150
100
30
20
150
S
Rs.000
40
40
80
50
20
10
80
Required: P acquired 40,000 Rs.1 shares in S on 30 June 20X4 for Rs.70,000, when the retained earnings of S
amounted to Rs.15,000. The group has a policy of measuring non-controlling interest at
proportionate share of net assets at the date of acquisition. 20% of goodwill has impaired to
date?
Fair values adjustments of subsidiary company assets/liabilities
If fair value differs at the date of acquisition and if not incorporated in group financial
statements then goodwill may include certain gains/losses of identifiable assets, which is not
permitted by definitions of goodwill as well as by IFRS 3. The following is treatment of fair value
adjustments arising at the date of acquisition.
Page 5 of 43
Example 4
The summarized draft statement of financial positions of the companies in a group at 31 December
20X4 were
P
S
P
S
Rs.
Rs.
Rs.
Rs.
Sundry assets
86,000 24,500 Share capital (Rs.1 Ord.). 100,000 20,000
Investment in S (shares at cost)
27,000
- Retained earnings
22,000
6,500
Inventory
20,000 10,000 Payables
11,000
8,000
133,000 34,500
133,000 34,500
Prepare the consolidated statement of financial position at 31 December 20X4 for each of the following
alternatives.
a)
P acquired all the shares in S on 1 January 20X4, when S had accumulated profits of Rs.6,000.
b)
Facts as in (a) above, except that only 16,000 ordinary shares in S were purchased for Rs.27,000
c)
Facts as in (a) above, except that only 16,000 ordinary shares in S were purchased for Rs.27,000
on 1 January 20X4. The subsidiary has not incorporated the fair values in its separate books and
fair value adjustments identified by the parent company at the date of acquisition are as
follows: Carrying value
Fair value
Exist on subsequent
Page 6 of 43
Rs.
Rs.
Reporting date
Property (Non-Depreciable)
10,000
12,000
Yes
Inventory
6,000
4,500
NO
The group has a policy of measuring non-controlling interest at proportionate share of net assets at the
date of acquisition. 20% of goodwill has impaired to date.
5
Intra group balances
Example 5
Statements of financial position at 31 December 20X4
P
S
Rs.
Rs.
Investment in S (at cost)
19,000
-S current account
10,000
-Cash at bank
20,000 28,000
Other sundry assets
41,000 16,000
Total assets
90,000 44,000
Share capital (Rs.1 Ord.)
50,000 10,000
Retained earnings
30,000 20,000
Current liabilities
10,000
5,000
P current account
-9,000
90,000 44,000
P bought 7,500 shares in S on 1 January 20X4 when the balance on the retained earnings of S
was Rs.12,000.
Page 7 of 43
The current account difference has arisen as a cheque of Rs. 500 sent by S to P on 30 December
20X4 was not received by P until 3 January 20X5, Rs. 300 purchases by S from P wrongly credited
to some other creditor account and Rs. 200 charged by P for certain expenses paid on behalf of
S.
3
No stock related to intercompany purchases exists at the reporting date.
4
The P Group has the policy of measuring non-controlling interest at fair value (FV) and FV of NCI
was Rs. 6,000 at the date of acquisition.
5
Goodwill of Rs. 1,000 has been impaired to date
Prepare the consolidated statement of financial position at 31 December 20X4?
5.
Investment in Preference shares / loans
Example 6
Maximum acquired 90,000 Rs.1 ordinary shares, 50,000 Rs.1 preference shares and Rs.10,000 loan notes
in Minimum on 30 June 20X1.
The balance in the books of Maximum and Minimum as at 31 December 20X4 were as follows:
Maximum
Minimum
Rs.
Rs.
Non-current assets, at cost less depreciation
380,000
225,000
90,000 ordinary shares in Minimum, at cost
185,000
50,000 preference shares in Minimum, at cost
55,000
Rs.10,000 loan notes in Minimum
10,000
Current assets
200,000
143,500
Total assets
830,000
368,500
Ordinary shares of Rs.1
500,000
120,000
8% non-cumulative preference shares of Rs.1
80,000
7% loan notes
40,000
Revaluation reserve
50,000
30,000
Retained earnings
150,000
66,000
Payables
130,000
32,500
830,000
368,500
You are also given the following information:
Page 8 of 43
a)
The revaluation reserve and retained earnings of Minimum as at 30 June 20X1 were Rs.12,000
and Rs.30,500 respectively.
b)
The inventory of Minimum at 31 December 20X4 includes Rs.22,800 in respect of goods
purchased from Maximum. Maximum invoices Minimum at cost plus 20%.
c)
Minimum owed Rs. 5,000 to Maximum included in its payables, which also agree with the
receivable balance in Maximum books.
d)
Maximum has the policy of measuring NCI at proportionate share of net assets at the date of
acquisition.
e)
The whole amount of goodwill has impaired by the current reporting date.
You are required to prepare the consolidated statement of financial position of Maximum and its
subsidiary Minimum as at 31 December 20X4.
6.
Intra group trading and resultant stocks at the reporting date
Note: It may be possible that an item may be inventory for one entity and fixed asset for other entity
e.g. an item of inventory sold by parent company but recognized by subsidiary company as property,
plant and equipment. If this is the case then pass following adjusting entries while preparing
consolidated financial statements.
Debit
Sales
Credit
X (with sale price)

Cost of sales
X (cost to the seller)
Property,
plant
and
X (Profit margin)
equipment
In other words it is just goods taken by an entity from inventory for use in the business.
Example-7
Intra-group profits on stocks
P
S
Rs.
Rs.
75,000
Inventory
12,000
5,000
P current account
5,000
Other assets
83,000
90,000
Total assets
170,000 100,000
Page 9 of 43
Share capital (Rs. 1 ord.).

Retained earnings
Trade payables
50,000
40,000
100,000
55,000
20,000
5,000
170,000 100,000
1
P acquired 32,000 shares in S on 1 January 20X4 when the balance on the retained earnings of
S was Rs.50,000.
2
During the year S sold goods to P for Rs.80,000 making a standard mark up of 25%. At 31
December 20X4, P included in its inventory value Rs.5,000, being the price paid for goods
purchased from S.
3
Other than the goods in note no. 2 Rs. 5,000 goods are in transit not received by P till the
reporting date.
4
Except the goods in transit P has paid for the due amount to S before the year end.
Prepare the consolidated statement of financial position as at 31 December 20X4?
7
Dividends from subsidiary companies
a)
Dividend Payable from subsidiary company and Dividend Receivable in parent company are
treated as intra-group balance.
b)
Any amount of dividend payable to NCI is included in NCI.
c)
If the dividend declared is greater than post-acquisition profit, then it was declared out of preacquisition profits.
Possible situations:
1.
Dividend declared / paid by subsidiary company and duly recorded by both companies.
Do nothing in group financial statements
2.
Dividend declared by subsidiary company and no recording by both companies
Parent company
Subsidiary company
Debit: Dividend Receivable Debit: SRE (Pre or Post)
Credit: CRE or P&L
Credit: Dividend Payable
The dividend payable and receivable balances are cancelled.
3.
Dividend declared by subsidiary company and no recording in parents accounts
Parent company
Debit: Dividend Receivable
Credit: CRE or P&L
The dividend payable and receivable balances are cancelled.
4.
Dividend declared / paid by subsidiary and no recording in parent company
Parent company
Debit: Dividend Receivable
Credit: CRE or P&L
Debit: Cash in Transit
Page 10 of 43
Credit: Dividend Receivable

Dividend declared / paid by subsidiary and parent company has only recorded Dividend
Receivable
Parent company
Debit: Cash in Transit
Credit: Dividend Receivable
6.
Dividend declared by subsidiary company from Pre-Acquisition profit and parent company
treated that as income.
Adjusting Entry
Debit: CRE or P&L
Credit: Cost of investment
Example 8
Up-minster acquired 80% of the ordinary share capital of Barking several years ago when the balance
on the accumulated profits of Barking was Rs.12,000. Their respective draft statement of financial
positions at 31 December 20X4 are as follows:
Up-minster
Barking
Rs.
Rs.
Non-current assets
100,000
92,000
Investment in Barking
55,000
Current assets
45,000
31,000
Total assets
123,000
200,000
Ordinary shares capital
100,000
50,000
Preference share capital
10,000
Retained earnings
80,000
42,000
Proposed ordinary dividend (declared Dec 20X4)
10,000
Sundry payables
20,000
11,000
200,000
123,000
Up-minster has not made any entry for the dividend receivable from Barking for the year. A proposed
preference dividend of Rs.2,000 by Barking (also declared in December 20X4) has not been accounted
for by either company. Up-minster purchased 30% of the preference shares for Rs.3,500 some years ago.
Its the group policy to measure NCI at proportionate share of FV of net assets at the date of acquisition.
Prepare the consolidated statement of financial position at 31 December 20X4.
5.
7.
Intra group sale of fixed assets
Page 11 of 43
Example 9

Inventory
Other non-current assets
P
Rs.
75,000
12,000
83,000
170,000
S
Rs.
5,000
95,000
100,000
Share capital (Rs. 1 Ord.).

Retained earnings
50,000
40,000
120,000
60,000
170,000 100,000
a) P acquired 32,000 shares in S on 1 January 20X4 when the balance on the retained earnings of S
was Rs.50,000.
b) During the year S sold fixed assets to P for Rs.2,000 having a book value of Rs. 1,500. P & S both
charge depreciation @ 20% on such assets. Asset still exist in the books of P.
c) The group has a policy of measuring NCI at proportionate share of FV of net assets at the date
of acquisition.
d) There has been no impairment loss on goodwill till now.
Required: - Prepare the consolidated statement of financial position at 31 December 20X4?
8.
Fair value adjustment of depreciable assets
Page 12 of 43
Example 10

Inventory
Other net assets
Share capital (Rs. 1 Ord.).

Retained earnings
P
Rs.
75,000
12,000
83,000
170,000
S
Rs.
20,000
80,000
100,000
50,000
120,000
170,000
40,000
60,000
100,000
a)
P acquired 32,000 shares in S on 1 January 20X1 when the balance on the retained earnings of S
was Rs.10,000.
b)
The cost of fixed assets of S on January 01, 20X1 was Rs. 200,000 and accumulated depreciation
of Rs. 40,000. The fair value of these assets was Rs. 220,000 on the date of acquisition. The
company depreciates such type of assets @ 20% on cost. The S has not incorporated the
revalued amount in its separate accounts.
Required: - Prepare the consolidated statement of financial position at 31 December 20X4?
11
Subsidiary acquired during the year
You have to determine pre and post acquisition retained earnings by allocating the profit for the
year according to the information provided. Normally assume that the profit was accrued
evenly over the year.
The dividend paid during the year is also accrued evenly over the year.
Page 13 of 43
Example 11
P acquired 4 million of S equity shares paying Rs. 5.5 each and Rs. 500,000 (at par) of its 10%
redeemable preference shares on June 30, 20X2. At April 01, 20X2 the accumulated retained earnings
of S were Rs. 5,280,000.
Statement of financial positions at 31 March 20X3
P
S
Rs. (000)
Rs. (000)
Non- current assets
PPE
38,450
22,220
Investment in S
Equity
22,000
-Preference shares
500
-60,950
22,220
Current assets
Inventory
9,850
6,590
Trade receivables
11,420
3,830
Cash and bank
490
-21,760
10,420
82,710
32,640
Equity and liabilities
Capital and reserves
Equity capital Rs. 1 each
10,000
5,000
Accumulated profits
52,640
15,280
62,640
20,280
Non-current liabilities
10% loan notes
12,000
4,000
10% redeemable preference capital
-2,000
12,000
6,000
Current liabilities
Trade payables
5,600
3,810
Overdraft
-570
Income taxes
2,470
1,980
8,070
6,360
82,710
32,640
The following information is relevant:
a)
Included in PPE of S is a large area of development land at its cost of Rs.5 million. Its fair value at
the date S was acquired was Rs. 7 million and by 31st March 20X3 this had risen to Rs.8.5 million.
The group valuation policy for development land is that it should be carried at fair value and not
depreciated.
b)
Also at the date S was acquired, its PPE included plant that had a fair value of Rs. 4 million in
excess of its carrying value. This plant had a remaining life of 5 years. The group calculates
depreciation on straight-line basis. The fair value of Ss other net assets approximates the same.
c)
In the post acquisition period S sold goods to P for Rs. 1.8 million. S adds a 20% mark-up on cost
to all its sales Goods with transfer price of Rs. 450,000 were included in Ps inventory at 31st March
20X3.
d)
The balances on the current accounts of the parent and subsidiary were Rs. 240,000 on 31st
March 20X3.
e)
The group has the policy of measuring NCI at FV at the date of acquisition. The MV of S
company shares at the date of acquisition was Rs. 4.90 per share.
f)
Consolidated goodwill is subjected to an annual impairment review; the recoverable value of
Net Assets of S is Rs. 28 million at the current reporting date.
Required: Prepare the consolidated statement of financial position of P group on 31st March 20X3.
Page 14 of 43
12
Expenses on acquisition
13 Other Fair Value Adjustments
Example 12
M/S Haseeb Limited acquired 75% M/S Saqib Limited on September 30, 2008 for Rs. 12 million by paying
immediately Rs. 10 million to the former owners and agreed to pay the balance amount after one year.
The discount rate Haseeb Limited uses for its present value calculation is 12%. The statements of financial
position for both the companies for the year ended December 31, 2008 is as follows: -
Haseeb Ltd.
Saqib Ltd.
(Rs. 000)
(Rs. 000)
Investment in Saqib Ltd
10,000
-Property, plant and equipment
20,000
8,000
Current assets
15,000
6,000
45,000
14,000
Share capital
15,000
6,000
Retained earnings b / f
10,000
3,000
Profit for the year
6,000
1,200
31,000
10,200
Current liabilities
14,000
3,800
45,000
14,000
The following further information is also available: a) Haseeb Ltd only recorded the investment in Saqib Ltd at the amount of cash paid.
Page 15 of 43
b) The fair value of property, plant and equipment of Saqib Ltd at the date of acquisition was Rs.
1,000,000 more than its carrying value which results in extra depreciation of Rs. 45,000 in the post
acquisition period.
c) In the post acquisition period Saqib Ltd sold goods to Haseeb Ltd charging Rs. 100,000 as margin
on goods. 55% of the goods are still lying with Hasseeb Ltd.
d) All revenues and expenses have accrued evenly through the year.
e) The group has the policy of measuring NCI at the proportionate share of net assets at the date
of acquisition.
f) Saqib Ltd has a popular brand developed over many years in the past but has not been
recognized in its books, a professional firm of valuers placed a value of Rs. 200,000 at the date of
acquisition.
Required: a) Goodwill arising on acquisition
b) Consolidated balance sheet of Haseeb Ltd group
c) Statement of changes in equity of Haseeb Ltd Group
CONSOLIDATION OF STATEMENT OF COMPREHENSIVE INCOME
Working 1:
Parent CoCurrent year
Xxx
(xxx)
Xxx
(xxx)
(xxx)
(xxx)
xxx
xxx
(xxx)
Xxx
(xxx)
-
Subsidiary CoPost Acquisition

Xxx
(xxx)
Xxx
(xxx)
(xxx)
(xxx)
Adjustments
Consolidated
Figures
xxx
(xxx)
xxx
(xxx)
(xxx)
Sales
SN1
Less: cost of sales
SN1-5
Gross profit
Selling and distribution
Administration
SN6
Operating profit
Dividend Income from subsidiary
(xxx)
Interest income from subsidiary
(xxx)
Interest expense
(xxx)
xxx
(xxx)
Profit before tax
Xxx
(xxx)
xxx
Tax expense
(xxx)
(xxx)
Share of profit from associate
xxx
xxx
Non-controlling interest (SN 7)
(x)
x
(xxx)
Profit attributable to group
Xxx
Xxx
(xxx)
xxx
Extended Working for the Retained Earnings Extract:
Parent CoSubsidiary CoAdjustments
Consolidated
Current year
Post Acquisition
Figures
Xxx
xxx
(xxx)/xxx
Xxx
Parent profit B/F
Xx
(xx)
Xxx
Subsidiary Profit B/F
xxx SN9
(xxx)/xxx XN9
Xxx
Page 16 of 43
Dividend (SN10)
(xxx)
xxx
(xx)
Xxx
C/D Parent
Co RE
C/D Subsidiary
Co RE
Xxx
Statement of
FP
Adjustments
SN1 Intra Group Sales
Debit: Sales
SN2 Unrealized Profit on Intra Group Sales
Debit: Cost of
Sales
Debit: Cost of
Sales
Debit: Asset
SN3 Extra Depreciation on Fair Value adjustment of

depreciable assets of subsidiary
SN4 Extra Depreciation on Intra Group Sale of Fixed Assets
SN5 Gain on disposal on intra group sale of assets
Debit: Cost of
Sales
Debit: Cost of
Sales
SN6 Impairment of goodwill
(xxx)
Xxx
Consolidated
RE
Credit: Cost of
Sales
Credit: Closing
Stock
Credit: Asset
Credit: Cost of
Sales
Credit: Asset
Credit: Goodwill
SN7 Adjustment Profit and allocate value of NCI

Profit after tax
xx
Less:
Unrealized Profit on closing stock if subsidiary
company is seller
(xx)
Gain on sale of fixed assets if subsidiary
company is seller
(xx)
Extra depreciation because of fair value
adjustment of depreciable assets (if fair value
(xx)
note recorded in S Co. books)
Add:
Extra Depreciation on intra group sale of FA
Xx
(S.co is Buyer)
Adjusted Profit
Xx
Allocate NCI their share of the - Loss Share Debit: NCI Credit: P&L Note: We are allocating
profit
subsidiarys profit
- Profit share Debit: P&L Credit: NCI
SN8 Only the group share of brought forward post acquisition profits
SN9 All prior year adjustment on profit/loss
SN10 Only the dividend paid out by the parent will appear in the extract
E-1
Highmore acquired 75% of the ordinary shares of Slowmore on that companys incorporation on
June 01, 2004. The summarized statements of comprehensive income of the two companies for
the year ending May 31, 2009 are set out below:
Income statement
Sales revenue
Cost of sales
Gross profit
Administrative expenses
Profit before tax
Taxation
Profit after tax
Other comprehensive income
Gain on AFS financial assets
Revaluation surplus during the
Highmore
Rs.
75,000
30,000
45,000
14,000
31,000
10,000
21,000
Slowmore
Rs.
38,000
20,000
18,000
8,000
10,000
2,000
8,000
50,000
100,000
30,000
20,000
Page 17 of 43
year
150,000
50,000
Total comprehensive income
171,000
58,000
Required: Prepare consolidated statement of comprehensive income for the year ended May 31, 2009?
E-2
Highmore acquired 80% of the ordinary shares of Slowmore on 1 October2009. The summarized
statements of comprehensive income of the two companies for the year ending 31 December
2009 are set out below. The incomes and expenses have accrued evenly during the year.
Highmore Slowmore
Rs.
Rs.
60,000
Sales revenue
75,000
Cost of sales
30,000
36,000
Gross profit
45,000
24,000
14,000
8,000
Profit before tax
31,000
16,000
Taxation
10,000
4,000
Profit after tax
21,000
12,000
Required: Prepare consolidated statement of comprehensive income for the year ended 31 December
2009?
E-3
Highmore acquired 100% of the ordinary shares of Slowmore some year ago. The Statements of
Comprehensive Income for year ending May 31, 2009 are given hereunder: Highmore Slowmore
Rs.
Rs.
Operating Profit
450
200
Dividend from Slowmore
50
-Profit before tax
500
200
Taxation
150
80
Profit after tax
350
120
Required: Prepare consolidated statement of comprehensive income for the year ended May 31, 2009?
E-4
Highmore has owned 100% of Slowmore for a number of years. The income statements of the
individual companies are shown below. When Highmore acquired the shares of Slowmore,
Slowmores retained earnings were Rs.4,000. Other points are as follows: 1.
Highmore has not accounted for Slowmores dividend.
2.
Higmore sold goods costing Rs.10,000 to Slowmore for Rs.15,000.
3.
At the statement of financial statement date 31 December 2009 20% of goods remained un-sold
by Slowmore.
4.
Goodwill has impaired by Rs.2,000 during the current year.
5.
Impairment of Good will prior to the year ending 31 December 2009 totaled Rs.10,000.
Statement of comprehensive Income for the year ended 31 December 2009
Highmore Slowmore
Rs.
Rs.
280
Sales revenue
400
Cost of sales
270
190
Gross profit
130
90
Distribution expenses
20
10
30
15
Profit before tax
80
65
Taxation
17
11
Profit after tax
63
54
Retained earnings
Retained earnings brought
11
7
forward
Profit for the year
63
54
74
61
Page 18 of 43
Dividends
(40)
(30)
Retained earnings carried
31
34
forward
Required: Prepare consolidated statement of comprehensive income and consolidated statement of
changed in equity?
E-5
Highmore acquired80% of Slowmore shears two years ago.
Notes
a.)
Slowmore sold goods costing Rs.20,000 to Highmore for Rs.30,000.
b.)
At the reporting date 31 December 2009 60% of goods remained unsold.
c.)
Highmore has not accounted for Slowmores dividends.
d.)
At the date of acquisition, Slowmores retained earnings were Rs.20,000.
e.)
Goodwill has suffered an impairment loss of Rs.5,000 during the current year. The non- controlling
interest is being valued on a proportionate share of net assets basis.
Statement of comprehensive income for the year ended 31 December 2009
Highmore Slowmore
Income statement
Rs.
Rs.
330
Sales revenue
640
Cost of sales
410
200
Gross profit
230
130
35
12
Distribution expenses
70
54
Profit before tax
125
64
Taxation
26
10
Profit after tax
99
54
Other comprehensive income
Fair value gain on AFS
30
(20)
investments
(20)
30
129
34
Retained earnings brought
29
35
forward
129
34
158
69
Dividends
(82)
(40)
Retained earnings carried
76
29
forward
Required: Prepare consolidated statement of comprehensive income and show the analysis of retained
earnings in the consolidated statement of changes in Equity.
E-6
Highmore acquired 60% of the ordinary shares of Slowmore. At that time shareholders equity was
Rs. 57,000. No ordinary shares have been issued since that time. Highmore also provided 50%of
Slomores loan. The statements of comprehensive income and extract of statements of changes
inequity of the two companies are shown below.
Statement of comprehensive income for year ending 31 December 2009
Highmore Slowmore
Income statement
Rs.
Rs.
Operating profit
100,500
30,000
Investment income from ordinary shares in
3,000
Slowmore
Interest income from Slowmore
2,500
-Interest expenses
(7,000)
(5,000)
Profit before tax
99,000
25,000
Taxation
(38,000)
(10,000)
Profit after tax
61,000
15,000
Statement of changes in equity
Page 19 of 43
Balance brought forward

148,000
63,000
Net profit for the year
61,000
15,000
Dividend ordinary
(10,000)
(5,000)
Balance at the end of the year
199,000
73,000
Notes: a)
At the beginning of the year Highmore sold fixed asset having carrying value of Rs. 5,000 for Rs.
7,000 to Slowmore. The asset was having remaining useful life of five years at the date of sale
and was being depreciated on straight line basis.
b)
Slowmore sold goods costing Rs. 10,000 to Highmore at markup of 20%. All the goods remained
unsold by Highmore at the year end.
c)
The NCI was measured at fair value at the date of acquisition and goodwill of Rs. 500 has been
impaired in the current year.
d)
Slowmore incurred an expense of Rs. 1,000 on developing a new production process and
recognized that as an intangible asset in its separate financial statements. The management of
Highmore has decided to discontinue the further development as the market competition is
strong in this area. Slowmore has not derecognized the expense in its separate financial
statements.
Required: Prepare consolidated statement of comprehensive income and extract from the statement of
changes in Equity for the Highmore group?
E-7
Draft statements of comprehensive income and statements of changes in Equity of Highmore
and its subsidiary Slowmore for the year ended 31 December 2009 are shown below.
Statement of comprehensive income for year ending 31 December 2009
Highmore Slowmore
Rs.
Rs.
Sales revenue
319,600
216,800
Cost of sales
(158,400) (123,200)
Gross profit
161,200
93,600
(54,000)
(32,000)
Operating profit
107,200
61,600
Investment income from ordinary shares in Slowmore
9,000
Investment income from preference shares in
1,600
Slowmore
Interest income
2,000
3,000
Profit before taxation
119,800
64,600
Taxation
(58,800)
(28,600)
Profit after tax
61,000
36,000
Retained earnings brought forward
266,800
107,200
Profit for the year
61,000
36,000
Ordinary dividend
(30,000)
(20,000)
Preference dividend
(12,000)
(8,000)
Retained earnings carried forward
285,800
115,200
1.
On 1 July 2009 Highmore Acquired 90% of Slowmore ordinary share capital and 40%of its
preference share capital.
2.
Slowmores cost of sales includes a depreciation charge on some plant and equipment for the
year ending 31 December 2009 of Rs.6,000. At 1 January 2009 this plant and equipment (which
was two years old at that time) had a book value of Rs.18,000. When bought its useful life was 5
years. At the 1 July 2009, the fair value of this plant based on replacement cost was Rs.25,000.
The useful life of plant was unchanged.
3.
The Slowmore has not recognized an internally generated brand in its separate financial
statements at the date of acquisition. The fair value of this brand at the date of acquisition was
Rs. 15,000 and expected remaining life of 5 years. The group uses straight line method for
amortizing such brands.
4.
Highmore has not provided Slowmore with any of its loan capital.
Page 20 of 43
5.
The revenue of Highmore includes Rs.38,000 in respect of goods sold to Slowmore at a price that
yielded a profit of 20 percent on selling price. These sales were made after acquisition. Rs.2,000
of these goods was in the closing inventory of Slowmore.
Required: Prepare consolidated statement of comprehensive income and extract from the statement of
changes in Equity for the Highmore group?
E-8
M/S Haseeb Limited acquired 75% M/S Saqib Limited on September 30, 2008 for Rs. 12 million by
paying immediately Rs. 10 million to the former owners and agreed to pay the balance amount
after one year. The discount rate Haseeb Limited uses for its present value calculation is 12%. The
profit and loss account for both the companies for the year ended December 31, 2008 is as
follows: Haseeb Ltd.
Saqib Ltd.
(Rs. 000)
(Rs. 000)
Revenue
10,000
5,000
Cost of sales
(6,500)
(4,000)
Gross profit
3,500
1,000
Operating cost
(1,500)
(400)
Operating profit
2,000
600
Tax expense
(450)
(200)
Profit after tax
1,550
400
Statement of changes in equity extract
Share capital
20,000
5,000
Retained earnings on January 01, 2008
15,000
7,500
The following further information is also available: a)
The fair value of property, plant and equipment of Saqib Ltd at the date of acquisition was Rs.
1,000,000 more than its carrying value which results in extra depreciation of Rs. 45,000 in the post
acquisition period.
b)
In the post acquisition period Saqib Ltd sold goods to Haseeb Ltd valuing Rs. 250,000 charging
Rs. 100,000 as margin on goods. 55% of the goods are still lying with Hasseeb Ltd.
c)
All revenues and expenses have accrued evenly through the year.
d)
The impairment loss on goodwill is 25% of the amount determined at the date of acquisition.
Required: a)
Goodwill arising on acquisition
b)
Consolidated Profit and loss account of Haseeb Ltd group
c)
Statement of changes in equity of Haseeb Ltd Group
Page 21 of 43
ADDENDUM TO CHAPTER 5
GOODWILL IMPAIRMENT UNDER IAS 36

Introduction
In accordance with IFRS 3 (as revised in 2008), the acquirer measures and recognizes goodwill as of the
acquisition date as the excess of (a) over (b) below:
(a)
the aggregate of:
(i)
the consideration transferred measured in accordance with IFRS 3, which generally
requires acquisition-date fair value;
(ii)
the amount of any non-controlling interest in the acquiree measured in accordance with
IFRS 3; and
(iii)
in a business combination achieved in stages, the acquisition-date fair value of the
acquirers previously held equity interest in the acquiree.
(b)
the net of the acquisition-date amounts of the identifiable assets acquired and liabilities
assumed measured in accordance with IFRS 3.
Allocation of goodwill
IAS 36 requires goodwill acquired in a business combination to be allocated to each of the acquirers
cash-generating units, or groups of cash-generating units, expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those
units, or groups of units. It is possible that some of the synergies resulting from a business combination will
be allocated to a cash-generating unit in which the non-controlling interest does not have an interest.
Testing for impairment
Testing for impairment involves comparing the recoverable amount of a cash-generating unit with the
carrying amount of the cash-generating unit.
If an entity measures non-controlling interests as its proportionate interest in the net identifiable assets of
a subsidiary at the acquisition date, rather than at fair value, goodwill attributable to non-controlling
interests is included in the recoverable amount of the related cash-generating unit but is not recognized
in the parents consolidated financial statements. As a consequence, an entity shall gross up the
carrying amount of goodwill allocated to the unit to include the goodwill attributable to the noncontrolling interest. This adjusted carrying amount is then compared with the recoverable amount of the
unit to determine whether the cash-generating unit is impaired.
Allocating an impairment loss
IAS 36 requires any identified impairment loss to be allocated first to reduce the carrying amount of
goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the
carrying amount of each asset in the unit.
If a subsidiary, or part of a subsidiary, with a non-controlling interest is itself a cash-generating unit, the
impairment loss is allocated between the parent and the non-controlling interest on the same basis as
that on which profit or loss is allocated.
If a subsidiary, or part of a subsidiary, with a non-controlling interest is part of a larger cash-generating
unit, goodwill impairment losses are allocated to the parts of the cash-generating unit that have a noncontrolling interest and the parts that do not. The impairment losses should be allocated to the parts of
the cash-generating unit on the basis of:
(a)
to the extent that the impairment relates to goodwill in the cash-generating unit, the relative
carrying values of the goodwill of the parts before the impairment; and
(b)
to the extent that the impairment relates to identifiable assets in the cash-generating unit, the
relative carrying values of the net identifiable assets of the parts before the impairment. Any
such impairment is allocated to the assets of the parts of each unit pro rata on the basis of the
carrying amount of each asset in the part.
In those parts that have a non-controlling interest, the impairment loss is allocated between the parent
and the non-controlling interest on the same basis as that on which profit or loss is allocated.
If an impairment loss attributable to a non-controlling interest relates to goodwill that is not recognized in
the parents consolidated financial statements, that impairment is not recognized as a goodwill
impairment loss. In such cases, only the impairment loss relating to the goodwill that is allocated to the
parent is recognized as a goodwill impairment loss.
Page 22 of 43
Example # 1
Parent acquires an 80 per cent ownership interest in Subsidiary for CU2,100 on 1 January 20X3. At that
date, Subsidiarys net identifiable assets have a fair value of CU1,500. Parent chooses to measure the
non-controlling interests as the proportionate interest of Subsidiarys net identifiable assets of CU300 (20%
of CU1,500). Goodwill of CU900 is the difference between the aggregate of the consideration
transferred and the amount of the non-controlling interests
(CU2,100 + CU300) and the net identifiable assets (CU1,500).
The assets of Subsidiary together are the smallest group of assets that generate cash inflows that are
largely independent of the cash inflows from other assets or groups of assets. Therefore Subsidiary is a
cash-generating unit. Because other cash-generating units of Parent are expected to benefit from the
synergies of the combination, the goodwill of CU500 related to those synergies has been allocated to
other cash-generating units within Parent. Because the cash-generating unit comprising Subsidiary
includes goodwill within its carrying amount, it must be tested for impairment annually, or more
frequently if there is an indication that it may be impaired (see paragraph 90 of IAS 36).
At the end of 20X3, Parent determines that the recoverable amount of cash-generating unit Subsidiary is
CU1,000. The carrying amount of the net assets of Subsidiary, excluding goodwill, is CU1,350.
Required: - Calculate and allocated impairment loss to goodwill and other assets, also identify the share
of loss of NCI and Group?
Example # 2
Parent acquires an 80 per cent ownership interest in Subsidiary for CU2,100 on 1 January 20X3. At that
date, Subsidiarys net identifiable assets have a fair value of CU1,500. Parent chooses to measure the
non-controlling interests at fair value, which is CU350. Goodwill of CU950 is the difference between the
aggregate of the consideration transferred and the amount of the non-controlling interests (CU2,100 +
CU350) and the net identifiable assets (CU1,500).
The assets of Subsidiary together are the smallest group of assets that generate cash inflows that are
largely independent of the cash inflows from other assets or groups of assets. Therefore, Subsidiary is a
cash-generating unit. Because other cash-generating units of Parent are expected to benefit from the
synergies of the combination, the goodwill of CU500 related to those synergies has been allocated to
other cash-generating units within Parent. Because Subsidiary includes goodwill within its carrying
amount, it must be tested for impairment annually or more frequently if there is an indication that it
might be impaired.
Testing Subsidiary for impairment
At the end of 20X3, Parent determines that the recoverable amount of cash-generating unit Subsidiary is
CU1,650. The carrying amount of the net assets of Subsidiary, excluding goodwill, is CU1,350.
Required: - Calculate and allocated impairment loss to goodwill and other assets, also identify the share of loss of
NCI and Group?
Past Papers
On January 1, 2008, Misbah Holding Limited, dealing in textile goods, acquired 90% ownership interest in
Salman Limited (SL), a ginning company, against cash payment of Rs. 450 million. At that date, SLs net
identifiable assets had a book value of Rs. 350 million and fair value of Rs. 400 million.
It is the policy of the company to measure the non-controlling interest at their proportionate share of
SLs net identifiable assets.
During the year ended December 31, 2008, SL incurred a net loss of Rs. 150 million. The impairment
testing exercise carried out at the end of the year, by a firm of consultants, showed that the
recoverable amount of SLs business is Rs. 200 million. However, the Board of Directors is inclined to take
a second opinion as they estimate that the recoverable amount is Rs. 390 million.
Required:
Based on each of the two valuations, compute the amounts to be reported in the consolidated
statement of financial position as of December 31, 2008 in respect of:
Goodwill;
Net identifiable assets, and
Non-controlling interest.
(15)
Page 23 of 43
CLASS ASSIGNMENT 1
Q-1
On 31 December 2009 P acquired all the shares of S for Rs.60,000. The statements of financial position of
the individual enterprises at that date were as follows:
Statement of financial position as at 31 December 2009
P
S
Rs.
Rs.
Total Assets
Non-current assets:
Property Plant & Equipment
120,000
40,000
Investment in shares of S
60,000
______
______
180,000
40,000
Net Current Assets
20,000
10,000
______
______
200,000
50,000
_______
______
Equity and Liabilities
Capital and reserves:
Ordinary Shares of Rs 10.00 each
100,000
20,000
Retained Profits
100,000
30,000
_______
______
200,000
50,000
Required:
Prepare the consolidated statement of financial position for the P Group on 31 December 2009.
Q-2
On 31 December 2008 Pacemaker acquired all the shares of Syclop for Rs. 60,000. At that time Syclop
accumulated profits were Rs. 30,000. The statements of financial position of the individual enterprises at
31 December 2009 were as follows:
Statements of financial position as at 31 December 2009
Pacemaker
Syclop
Rs.
Rs.
Total Assets
Non-current assets:
160,000
50,000
Investment in shares of Syclop
60,000
_______
______
220,000
50,000
Net Current Assets
30,000
10,000
______
______
60,000
250,000
Capital and Reserves:
Ordinary shares of Rs. 10.00 each
Retained Profits
100,000
20,000
150,000
40,000
_______
______
250,000
60,000
Consolidated Goodwill is subjected to an annual impairment review. No impairment has been
detected to date.
Required:
Prepare the consolidated statement of financial position for the pacemaker group on 31 December
2009.
Q-3
On 31 December 2009 Pedantic acquired 3,200 ordinary shares of Sophistic for Rs. 120,000. The
statements of financial position of the individual enterprises at 31 December 2009 were as follows:
Page 24 of 43

Total Assets
Non-current assets:
Investment in shares of Sophistic
Net Current Assets
Pedantic
Rs.
240,000
120,000
_______
360,000
40,000
_______
400,000
Sophistic
Rs.
80,000
______
80,000
20,000
______
100,000

Ordinary shares of Rs.10 each
Retained Profits
200,000
40,000
200,000
60,000
_______
______
400,000
100,000
It is group policy to value non-controlling interest at its proportionate share of the subsidiarys identifiable
net assets.
Required:
Prepare the Pedantic groups consolidated statement of financial position at 31 December 20X1.
Q-4
On 31 December 20008, Patronic acquired 2,800 ordinary shares of Sardonic for Rs. 120,000. At that time
Sardonic accumulated profits were Rs. 60,000. The statements of financial position of the individual
enterprises at 31 December 2009 were as follows:
Patronic
Sardonic
Rs.
Rs.
Total Assets
Non-current assets:
320,000
100,000
Investment in shares of Sardonic
120,000
_______
_______
440,000
100,000
Net Current Assets
60,000
20,000
______
______
500,000
120,000
Ordinary shares of Rs. 10 each
200,000
40,000
Retained Profits
300,000
80,000
______
______
500,000
120,000
Note consolidated Goodwill is subjected to an annual impairment review. No impairment has been
detected to date. It is group policy to value non-controlling interest (NCI) at fair value; the fair value of
NCI was Rs. 35,600 at the date of acquisition.
Page 25 of 43
ASSIGNMENT # 2
Q-1
On 1 January 2009 PARVEZ acquired 1,800 ordinary shares of SAJID. At that time SAJID retained profits
were Rs. 16,000. The statements of financial position of the individual enterprises at 31 December 2009
are as follows:
PARVEZ
SAJID
Rs.
Rs.
Total Assets
Non-current assets:
120,000
40,000
Cost of Investment in shares of SAJID
40,000
_______ ______
160,000
40,000
Current Assets
Inventories
20,000
10,000
Receivables
40,000
30,000
Current A/c with SAJID
16,000
Cash
4,000
_______
______
240,000
80,000
Ordinary shares of Rs. 10.00 each
Retained Profits
100,000
120,000
_______
220,000
Current Liabilities:
Accounts payable
Current account with PARVEZ
Bank Overdraft
6,000
24,000
20,000
______
44,000
20,000
-
18,000
12,000
_______
______
240,000
80,000
1. On 28th December 20X2 SAJID sent a cheque for Rs. 4,000 to PARVEZ. PERVEZ did not
account for this cheque until early January 20X3.
2. The group policy is to measure non-controlling interest at Fair value at the date of
acquisition. The fair value OF NCI was Rs. 15,000.
3. The fair value of Property, plant and equipment was Rs. 2,000 more than their carrying value
at the date of acquisition and those assets still exist in the statement of financial position of
the entity at the year end.
4. Consolidated goodwill is subject to an annual impairment review. The impairment loss
attributable to goodwill is Rs. 4,500.
Required: Prepare the PARVEZ groups consolidated statement of financial position at 31 December
2009.
Q-2
The draft statement of financial position at 31 March 2002 of Window Limited and its 80%
subsidiary Glass Ltd, acquired on 30 September 2001, are as follows:
Window Glass
Limited Limited
Rs 000
Rs 000
Fixed assets
Intangible assets
Patents
Goodwill
Tangible assets
6,276
400
550
1,104
Page 26 of 43
Investments: Shares in Glass Ltd
Current assets
Stocks
Debtors
Suspense account
Cash
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
180
6,456
2,054
1,854
1,950
256
1,672
5,732
(3,428)
2,304
8,760
806
846
264
1,916
(1,040)
876
2,930
4,000
950
3,810
8,760
1,400
1,530
2,930
Capital and reserves

Called up share capital
Ordinary Rs 10 shares
Revaluation reserve
Profit and loss account
The following points are relevant.

(i)
At acquisition the statement of financial position of Glass Ltd showed net assets with a
book value of Rs 2,530,000. Included in this total are freehold land with a book value of
Rs.500,000 (market value Rs 1,200,000), patents with a book value of Rs 400,000(market
value Rs 450,000) and goodwill (arising on the acquisition of an unincorporated business
some years ago) with a book value of Rs 600,000 (impairment loss of 50,000 has been
recognized in the post acquisition period by the acquiree). The fair values of all other
assets and liabilities are approximately equal to their book values. The above fair value
adjustments have not been incorporated in the separate books of Glass Limited.
(ii)
The directors of Window Limited intend to restructure and reorganize Glass Ltd and wish
to provide for future losses and restructuring costs which are forecasted at Rs 116,000.
(iii)
An investment in plant and machinery will be required to bring the remaining production
line of Glass Ltd up to date. This will amount to Rs 580,000 in the next 12 months.
(iv)
The consideration comprised cash of Rs 180,000 and 80,000 shares of Window Limited
issued at a nominal value of Rs 10 and fair value of Rs 26 each. The shares have not yet
been reflected in the books of Window Limited.
(v)
Professional fees to bankers and solicitors in respect of the acquisition amounted to Rs
150,000. In addition the directors of Window Limited estimate that the value of their time
spent on working the acquisition amounted to Rs 106,000.
(vi)
Glass Ltd sells part of its output to Window Limited. Included in the stock of Window
Limited are goods valued at Rs 300,000 purchased from Glass Ltd at cost plus 25%.
(vii)
Group policy is to measure full goodwill the fair value of NCI at the date of acquisition
was Rs. 20 per share.
Required:
(a)
Calculate the value of goodwill if any arising on the acquisition of Glass Ltd.
(b)
Show the Share Capital and Reserves on the consolidated statement of financial position of
Window Limited as at March 31 2002.
Page 27 of 43
ASSIGNMENT # 3
Q1
M/S Haneef Ltd purchased entire share capital of M/S Sajid Power Ltd at the date of its incorporation,
several years before. The shares were purchased at par value of Rs. 10 each. The total number of shares
issued by Sajid Power Ltd was 100 million. Following is the trial balance of both the companies for the
year ended June 30, 2009.
Haneef Ltd
Sajid Ltd
Debit
Credit
Debit
Credit
Rs. (m) Rs. (m)
Rs. (m) Rs. (m)
Sales
-12,000
-7,500
Cost of investment in Sajid Ltd
1,000
---Cost of sales
6,500
-4,500
-Operating expenses
3,500
-1,500
-Closing stock
2,300
-2,000
-Property,
plant
and
3,500
-1,200
-equipment
Accumulated depreciation
-1,500
-700
b/f
Dividend income from Sajid
-1,000
--Ltd
Ordinary share capital
-3,000
-1,000
Retained earnings opening
-2,500
-2,000
Creditors
-500
-300
Due from Sajid Ltd
1,000
---Debtors
2,500
-1,500
-Cash and bank balance
200
-500
-Due to Haneef Ltd
---700
Dividend paid
--1,000
-20,500
12,200
20,500
12,200
Further, the following intra group transactions took place.
a) Haneef Ltd sold goods worth Rs. 500 million to Sajid Ltd during the year of which 1/5th are still in
the inventory of Sajid Ltd. Haneef Ltd charges 20% margin on all goods it sells to associated
companies.
b) The intra group balances are not reconciled because of a cheque in transit of Rs. 200 million
sent by Sajid Ltd to Haneef Ltd and Rs. 100 million management fee charged by Haneef Ltd to
Sajid Ltd.
c) The depreciation for the year is not charged in the above balances, the group uses 20%
depreciation rate for all its property, plant and equipment on reducing balance basis. The
depreciation is to be charged in cost of sales.
Required: - Prepare consolidated statement of financial position as on June 30, 2009, statement of
comprehensive income and consolidated statement of changes in equity for the year ended June 30,
2009?
Q2
M/S Haneef Ltd purchased entire share capital of M/S Sajid Ltd on July 01, 2008 by paying Rs. 12 per
share and issued one share for every five shares of Sajid Ltd. The par value per share of Sajid Ltd is Rs. 10.
Following is the trial balance of both the companies for the year ended June 30, 2009. The market value
of Haneef Ltd shares at the date of acquisition was Rs. 20 each.
Haneef Ltd
Sajid Ltd
Debit
Credit
Debit
Credit
Rs. (m) Rs. (m)
Rs. (m) Rs. (m)
Sales
-12,000
-7,500
Cost of investment in Sajid Ltd
1,200
---Cost of sales
6,500
-4,500
-Operating expenses
3,500
-1,500
--
Page 28 of 43
Closing stock
Property,
plant
and
equipment
b/f
Dividend income from Sajid
Ltd
Creditors
Due from Sajid Ltd
Debtors
Cash and bank balance
Due to Haneef Ltd
Dividend paid
2,300
3,300
---
2,000
1,200
---
--
1,500
--
700
--
500
--
--
-3,000
-1,000
-2,500
-500
-500
-1,300
1,000
---2,000
-1,500
-200
-500
----700
--500
-20,000
11,700
20,000
11,700
Further, the following intra group transactions took place.
a) Haneef Ltd sold goods worth Rs. 500 million to Sajid Ltd during the year of which 1/5th are still in
the inventory of Sajid Ltd. Haneef Ltd charges 20% margin on all goods it sells to associated
companies.
b) The intra group balances are not reconciled because of a cheque in transit of Rs. 200 million
sent by Sajid Ltd to Haneef Ltd and Rs. 100 million management fee charged by Haneef Ltd to
Sajid Ltd.
c) The depreciation for the year is not charged in the above balances, the group uses 20%
depreciation rate for all its property, plant and equipment on reducing balance basis. The
depreciation is to be charged in cost of sales.
Required: - Prepare consolidated statement of financial position as at June 30, 2009, statement of
comprehensive income and consolidated statement of changes in equity for the year ended June 30,
2009?
PAST PAPERS
Q1
Following is the summarised trial balance of Faisal Limited (FL) and its subsidiaries, Saqib Limited (SL) and
Ayaz Industries Limited (AIL) for the year ended December 31, 2007:
FL
SL
AIL
Rs. (m)
Rs. (m)
Rs. (m)
Cash and bank balances
4,920
660
2,700
Accounts receivable
6,240
2,460
6,580
Stocks in trade closing
14,460
4,200
5,680
Investment in subsidiaries at cost
SL
9,000
AIL
10,500
Other investments
11,100
Property, plant and equipment
22,500
3,480
5,940
Cost of sales
49,200
18,000
21,000
Operating expenses
3,600
2,100
5,400
(5,760)
(420)
(1,260)
Ordinary share capital (Rs. 10 each
(30,000) (12,000)
(6,000)
(33,780)
(4,800)
Sales
(57,600) (16,500) (33,800)
Accounts payable
(2,760)
(1,980)
(1,440)
Gain on sale of fixed assets
(540)
Dividend income
(1,080)
Following additional information is also available: -
Page 29 of 43
i)
ii)
iii)
On January 01, 2007, FL acquired 480 million shares of AIL from its major shareholders for Rs.
10,500 million.
SL was incorporated on February 01, 2007. 75% of the shares were acquired by FL at par value
on the same date.
The following intercompany sales were made during the year 2007: Gross profit %
Amount
Sales
Included in
on sales
receivable /
buyers closing
payable at year
stocks in trade
end
Rs. (m)
Rs. (m)
Rs. (m)
Rs. (m)
FL to AIL
2400
900
20
SL to AIL
1800
600
800
10
AIL to FL
3600
1200
30
FL and its subsidiaries value stock in trade at the lower of cost or net realizable value. While
valuing FLs stock in trade, the stock purchased from AIL has been written down by Rs. 100
million.
iv)
On July 01, 2007, FL sold certain plants and machines to SL. Detail of the transaction are as
follows: Rs. (m)
Sale value
144
Less: cost of plant and machineries
150
(60)
Net book value
90
Gain on sale of plants
54
The plants and machineries were purchased on January 01, 2005, and were being depreciated
on straight line method over a period of five years. SL computed depreciation thereon using
the same method based on the remaining useful life.
FL billed Rs. 100 million to each subsidiary for management services provided during the year
2007 and credited it to operating expenses. The invoices were paid on December 15, 2007.
v)
Details of cash are as follows:Dividend
Date of declaration Date of payment
%
FL
Nov 25, 2007
Jan 5, 2008
20
AIL
Oct 15, 2007
Nov 20, 2007
10
Required: Prepare consolidated balance sheet and profit and loss account of FL and its subsidiaries for the year
ended December 31, 2007. Ignore tax and corresponding figures.
Q2
On January 1, 2002, Khan Limited (KL) acquired 375 million ordinary shares and 40 million preference
shares in Gul Limited (GL) whose general reserve and retained earnings on the date of acquisition,
stood at Rs. 200 million and Rs. 1,000 million respectively.
The following balances were extracted from the records of KL and its subsidiary on December 31, 2008:
KL
Debit
Rs. (m)
Ordinary share capital (Rs. 10 each)
12% Preference share capital (Rs. 10 each)
General reserve
Retained earnings
Loan from KL at 15% rate of interest
14% Term Finance Certificates (TFCs) (Rs. 100
each)
GL
Credit
Rs. (m)
6,800
1,750
2,000
Debit
Rs. (m)
Credit
Rs. (m)
5,000
1,000
500
1,200
2,000
2,250
Page 30 of 43
Accounts payable
Dividend payable preference shares
Dividend payable ordinary shares
Property, plant and equipment - at cost
Property, plant and equipment - acc.
depreciation
Investment in ordinary shares of GL
Investment in preference shares of GL
Loan to GL at 15% rate of interest
Investment in KL's TFCs (purchased at par value)
Profit before tax, interest and dividend
Dividend income
Interest income
Dividend receivable
Current assets
Interest on TFCs
Interest on loan from KL
Taxation
Preference dividend
Ordinary dividend interim
445
190
60
300
750
16,250
25,000
17,000
9,750
5,500
400
2,000
1,500
2,865
273
300
249
1,069
315
650
750
27,183
1,550
210
1,316
300
474
120
300
29,010
27,183
29,010
Following relevant information is available: i)
At the date of acquisition the fair value of buildings included in property, plant and equipment
of GL was assessed at Rs. 1000 million above its carrying value. All other identifiable assets and
liabilities were considered to be fairly valued. GL provided for depreciation on building at 10%
on the straight line basis.
ii)
GL purchased the TFC in KL on January 01, 2008.
iii)
The non controlling interest is measured at their proportionate share of the GLs identifiable net
assets.
iv)
There is no impairment in the value of goodwill since its acquisition.
v)
There are no components of other comprehensive income.
Required: Prepare the following in accordance with the requirement of International Financial Reporting
Standards: (a)
Consolidated statement of financial position as at December 31, 2008.
(b)
Consolidated statement of comprehensive income for the year ended December 31,
2008.
(c)
Consolidated statement of retained earnings for the year ended December 31, 2008.
Note:
Ignore deferred tax and corresponding figures.
Notes to the above statements are not required. However, show workings wherever it is necessary.
Page 31 of 43
ANSWERS TO ASSIGNMENTS
Assignment # 1
A-1
P Group
Consolidated statement of financial position
As at December 31, 2009
Rs.
Rs.
Assets
Non-current assets
Goodwill
160,000
10,000
170,000
Current assets
Net current assets
30,000
200,000
Equity
Consolidated retrained earnings
W-1 Group structure
Group
NCI
W-2 Cost of control account
Investment
Share capital
Pre-acquisition retained earnings
Goodwill
100,000
100,000
%
100
-100
Debit
60,000
60,000
200,000
Credit
20,000
30,000
10,000
60,000
A-2
Pacemaker Group
Rs.
Rs.
Assets
Non-current assets
Goodwill
210,000
10,000
220,000
Current assets
Net current assets
40,000
260,000
Equity
(150,000+10,000)
W-1 Group structure
Group
NCI
100,000
160,000
260,000
%
100
-100
Page 32 of 43

Investment
Share capital
Goodwill
Debit
60,000
60,000
Credit
20,000
30,000
10,000
60,000
A-3
Pedantic Group
Rs.
Rs.
Assets
Non-current assets
Goodwill
320,000
40,000
360,000
Current assets
Net current assets
60,000
420,000
Equity
NCI
W-1 Group structure

Group
NCI
Investment
Share capital
(60,000x0.80)
Goodwill
200,000
200,000
%
80
20
100
Debit
120,000
Credit
32,000
48,000
120,000
W-3 NCI
Share capital
SRE-pre
C/ d
400,000
20,000
420,000
40,000
120,000
8,000
12,000
20,000
20,000
20,000
Rs.
Rs.
A-4
Patronic Group
Assets
Non-current assets
Goodwill (50,000+5,600)
Current assets
Net current assets
420,000
55,600
475,600
80,000
Page 33 of 43
555,600
Equity
(300,000+14,000)
NCI
200,000
314,000
W-1 Group structure

Group
NCI
%
70
30
100
Debit
120,000

Investment
Share capital (40,000 x 0.70)
Pre-acquisition retained earnings (60,000x0.70)
Goodwill
41,600
555,600
120,000
W-3 NCI
Share capital
SRE-pre
SRE-post (20,000x0.30)
Goodwill
C/ d
514,000
Credit
28,000
42,000
50,000
120,000
12,000
18,000
6,000
5,600
41,600
41,600
W-4 NCI goodwill

Fair value of NCI
Share capital
SRE-pre
Goodwill
41,600
35,600
12,000
18,000
5,600
Assignment # 2
A-1
PARVEZ Group
Rs.
Assets
Non-current assets
Property, plant and equipment (160,000+2,000)
Goodwill (13,000-4,500)
Rs.
162,000
8,500
170,500
Current assets
Inventories
Receivables
Current a/c with SAJID (16,000-12,000-4,000)
Cash (4,000+4,000)
30,000
70,000
8,000
108,000
278,500
Equity
Consolidated earnings (120,000-3,375+3,000)
NCI
100,000
119,625
219,625
14,875
Page 34 of 43
234,500
Current liabilities
Accounts payable
Bank overdraft
W-1 Group structure

Group
NCI
Investment
Share capital (24,000x.75)
Pre-acquisition retained earnings (18,000x.75)
Goodwill
38,000
6,000
44,000
278,500
%
75
25
100
Debit
40,000
Credit
18,000
13,500
8,500
40,000
40,000
W-3 NCI
Share capital
SRE-pre
SRE-post (4,000x.25)
Goodwill
Impairment loss
C/ d
6,000
4,500
1,000
4,500
1,125
14,875
16,000
16,000
W-4 NCI goodwill

Fair value of NCI
Share capital
SRE-pre
Goodwill
W-5 Subsidiary Retained Earnings
At reporting date
Fair value gain (pre)
Pre-acquisition
Post acquisition
A2
WINDO LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL STATEMENT
AS AT MARCH 31, 2001
Rs. (000)
FIXED ASSETS
Intangible assets
Patents (400+50)
450
Goodwill
140
Tangible assets (7,380+700)
8,080
CURRENT ASSETS
Stocks (2,660-60)
2,600
Debtors
2,796
Cash
1,936
15,000
(6,000)
(4,500)
4,500
20,000
2,000
(18,000)
4,000
Rs. (000)
8,670
7,332
16,002
EQUITY AND LIABILITIES
Page 35 of 43
Equity
(4,000+800)
Share premium
Revaluation reserve
Retained earnings
NCI
4,800
1,280
950
3,866
Current liabilities
Creditors
4,468
16,002
Workings
W-1
Group retained earnings (Parent co.)
Suspense account
Share of post acquisition profits
W-2
Subsidiary retained earnings
Balance
Fair value gain (700+50)
Goodwill
URP on closing stock
Cost of control account (1,280x0.80)
NCI (1,280x0.20)
Consolidated retained earnings
(390x0.80)
NCI (390x0.20)
Cost of investment (180+2,080)
Share capital
Goodwill
3,810
(256)
312
3,866
Dr.
Cr.
1,530
750
550
60
1,024
256
312
78
2,280
2,280
2,260
2,260
W-4
Share capital
Post-acquisition retained earnings
Goodwill
W- 5
Goodwill NCI
Fair value of NCI
Less: share of net assets acquired
Goodwill
10,896
638
11,534
1,120
1,024
116
2,260
280
256
78
24
638
560
(536)
24
Assignment # 3
Page 36 of 43
A-1
HANEEF LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED JUNE 30, 2009
Assets
Non Current Assets
Property, plant equipment (W-6)
Goodwill
Current Assets
Stock (4,300-20)
Account Receivable
Cash at Bank (700+200)
Rs. (m)
Rs. (m)
2,000
--
2,000
4,280
4,000
900
9,180
Total assets
11,180

Equity
Share premium
3,000
Current liabilities
Trade payables
10,380
800
800
11,180
HANIF LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinar
y share
capital
Rs. (m)
Balance b/ f
3,000
-Dividend
3,000
Consolidated
retained earnings
Total
Rs. (m)
4,500
2,880
Rs. (m)
7,500
2,880
7,380
10,380
HANIF LIMITED
HL
SL
Adjustments
Sales
12,000
7,500
(500)
Cost of sales
(6,500)
(4,500)
(20)
Gross profit
5,500
3,000
(520)
Operating expenses
(3,500)
(1,500)
(100)
Operating profit
2,000
1,500
(620)
Dividend income
1,000
-(1,000)
Profit for the year
1,500
(1,620)
3,000
Workings
W-1 Percentage of holding
Group
NCI
7,380
Consolidated
19,000
(11,020)
7,980
(5,100)
2,880
-2,880
%
100
--
Page 37 of 43
W-2 Cost of control account-SL

Investment
Share capital
Goodwill
W-3 adjusting entries
Sales
Cost of sales
Cost of sales
c. Stock
Cash in transit
Due from Sajid Limited
Operating expenses
Due to Haneef Limited
Cost of sales
Assets a/c
W-4 Opening retained earnings -group
Parent company
Subsidiary post acquisition
Goodwill
W-5 property, plant and equipment
Cost
Accumulated depreciation b/ f
Carrying value b / f
Depreciation for the year
Goodwill
Rs.
Debit
500
100
Rs.
1,000
(1,000)
-Credit
500
20
20
200
200
100
100
500
500
Rs.
2,500
2,000
4,500
Rs.
HL
Rs.
3,500
(1,500)
2,000
(400)
1,600
SL
Rs.
1,200
(700)
500
(100)
400
A-2
HANEEF LIMITED
Assets
Non Current Assets
Property, plant equipment (2,300-460)
Goodwill
Current Assets
Stock (4,300-20)
Account Receivable
Cash at Bank (700+200)
Total
Rs.
4,700
(2,200)
2,500
(500)
2,000
Rs. (m)
Rs. (m)
1,840
100
1,940
4,280
3,500
900
8,680
Total assets
10,620

Equity
Share premium
3,200
200
5,420
8,820
Current liabilities
Trade payables
1,800
1,800
Page 38 of 43
10,620
HANIF LIMITED
Ordinar
Share
y share premium
capital
Rs. (m)
Rs. (m)
Balance b/ f
3,000
-Shares issued during the year
200
200
-Dividend
3,000
200
Consolidated
retained earnings
Total
Rs. (m)
2,500
-2,920
Rs. (m)
5,500
400
2,920
5,420
8,820
HANIF LIMITED
HL
SL
Adjustments
7,500
(500)
Sales
12,000
Cost of sales
(6,500)
(4,500)
20
Gross profit
5,500
3,000
(480)
Operating expenses
(3,500)
(1,500)
(100)
Operating profit
2,000
1,500
(580)
Dividend income
500
(500)
Profit for the year
1,500
(1,080)
2,500
Workings
Group
NCI
Investment (1,200+400)
Retained earnings
Share capital
Goodwill
Rs.

Sales
Cost of sales
Cost of sales
c. Stock
Cash in transit
Due from Sajid Limited
Operating expenses
Due to Haneef Limited
Cost of sales
Assets a/c
Debit
500
Consolidated
19,000
(10,980)
8,020
(5,100)
2,920
-2,920
%
100
-100
Rs.
1,600
500
1,000
100
Credit
500
20
20
200
200
100
100
460
460
Page 39 of 43
PAST PAPERS
A-1
FAISAL LIMITED
AS AT JUNE 30, 2008
Assets
Non Current Assets
Property, plant equipment (24,48054+18)
Other investments
Goodwill
Rs. (m)
Rs. (m)
24,444
Current Assets
Stock (24,340-530)
Account Receivable (15,280-800)
Cash at Bank
11,100
1,860
37,404
23,810
14,480
7,680
45,970
Total assets
83,374

Equity
30,000
36,463
Current liabilities
Trade payables (6,180-800)
Dividend payable
5,380
6,000
FAISAL LIMITED
Ordinar
y share
capital
Balance b/ f
Subsidiary company acquired during the
year
Total comp. income
Dividend
30,000
Consoli
dated
retaine
d
earning
s
33,780
-30,000
FAISAL LIMITED
FL
SL
AIL
Sales
57,600
16,500
33,800
Cost of sales
(49,200) (18,000) (21,000)
Gross profit
8,400
1,500
12,800
8,683
(6,000)
36,463
66,463
5,531
71,994
11,380
83,374
Total
NCI
Total
63,780
-5,160
63,780
5,160
8,683
(6,000)
66,463
491
(120)
5,511
9,174
(6,120)
71,994
Adjustments
(7,800)
7,288
(512)
Consolidated
100,100
(80912)
19,88
Page 40 of 43
Operating expenses
Operating profit
Gain on sale of PPE
Dividend income
Profit for the year
NCI
(3,600)
4,800
540
1,080
6,420
-6,420
Workings
Group
NCI
Investment
Share capital
Goodwill
(2,100)
(3,600)
--(3,600)
911
(2,689)
%
75
25
100
Rs.
SL
3,000
-3,000
19,500
(4,800)
(3,840)
1,860
AIL
1,200
960
2,160
Pre-
33,780
--33,780
Post-
W-6 Opening retained earnings

Parent company
Share from SL
Share from AIL
W-7 Opening retained earningsAIL
Group share
NCI share
W-8 Dividend AIL
Brought forward
Adjustment against profit or loss
a/c
NCI
Sales
Cost of sales
Cost of sales
c. Stock
Cost of sales
c. Stock
Cost of sales
c. Stock
Gain on sale of fixed assets
Assets a/c
Fixed assets
Cost of sales
-(512)
(54)
(480)
(1,046)
-(1,046)
(11,100)
8,088
486
600
9,174
(491)
8,683
%
80
20
100
Rs.
9,000
(9,000)
--
W-3 Cost of control account-AIL

Investment
Share capital
Pre-acquisition reserves
Goodwill
W-4 NCI at date of acquisition
Share capital
Pre-acquisition reserves
(5,400)
7,400
--7,400
(1,042)
6,358
4,800
3,840
960
--
600
480
120
Debit
7,800
Credit
7,800
180
180
60
60
290
290
54
54
18
18
Page 41 of 43
W-10 NCI
Profit after tax
Adjustments
Un-realized profit
Extra depreciation
NCI
SL
(3,600)
AIL
7,400
(60)
18
(3,642)
(910.50)
(390)
-7,010
(1,402)
A2
KHAN LIMITED
AS AT DECEMBER 31, 2008
Assets
Non Current Assets
Property, plant equipment
(41,250-26,750+1,000-100-600)
Goodwill
Rs. (m)
Rs. (m)
14,800
100
Current Assets
14,900
2,385
Total assets
17,285

Equity
6,800
14,514
Non-current liabilities
12% preference share capital (1,000-400)
14% TFCs (2,250-1,500)
Current liabilities
Trade payables
Dividend payable (750+36)
KHAN LIMITED
FOR THE YEAR ENDED DECEMBER 31, 2008
Ord.
share
capital
Balance b/ f
6,800
-Dividend
-6,800
600
750
635
786
Cons.
Gen.
Reserves
1,975
--1,975
KHAN LIMITED
FOR THE YEAR ENDED DECEMBER 31, 2008
KL
GL
Adjustments
Operating profit
2,865
1,550
(100)
Dividend income
273
(273)
1,350
1,421
17,285
Cons.
Retd.
earnings
1,700
2,822
(750)
3,772
Total
10,475
2,822
(750)
12,547
NCI
1,775
192
-1,367
Total
12,250
3,014
(750)
14,514
Consolidated
4,315
-
Page 42 of 43
Interest income
Interest on TFCs
Interest on loan
Preference dividend
300
(315)
---
210
-(300)
(120)
(510)
210
300
48
Profit before tax

Tax expense
Profit after tax
3,123
(650)
2,473
1,340
(474)
866
(325)
-(325)
Attributable to: - NCI

(866-100)x25%
Owners of parent
Workings
Group
NCI
%
75
25
100
Rs.
5,500
(3,750)
(1,650)
100
W-3 NCI-Opening
Share capital
Pre-acquisition reserves (500+75)
Post-acquisition reserves (50-100)
W-5 Opening retained earnings-GL

Fair value gain
Extra Depreciation
Group share
NCI share
W-6 Opening General Reserves GL
Group share
NCI share
W 7 adjusting entries
Opening retained earnings -GL
Cost of sales
4,282
(1,124)
3,014
192
2,822

Investment
Share capital
Pre-acquisition reserves (1,500+150)
Goodwill
W-4 Opening retained earnings/General Res

Parent company
Share from GL
(105)
-(72)
GR
1,750
225
1,975
Pre1,000
1,000
-2,000
1,500
500
Pre200
200
150
50
Debit
600
100
1,250
575
(50)
1,775
R/E
2,000
(300)
1,700
Post200
-(600)
(400)
(300)
(100)
Post300
300
225
75
Credit
700
Page 43 of 43

Chapter 5

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CHAPTER 5

IFRS 10 CONSOLIDATION OF PARENT AND SUBSIDIARY

Measurement of Assets and Liabilities and related Incomes and Expenses

Group has no books of account as a whole:

Parent has its own books of accounts

Subsidiary has its own books of accounts

Each company prepares their own Financial Statements

Investment in subsidiary shown in parent company Financial Statements

Share Capital of subsidiary

DEALING WITH THE STATEMENT OF FINANCIAL POSITION

Share capital of subsidiary company

Subsidiary company reserves

Example 1 Acquisition of wholly owned subsidiary

Example-2 Reserves (Pre-acquisition and post acquisition)

X (with sale price)

Share capital (Rs. 1 ord.).

Credit: Dividend Receivable

Intra group sale of fixed assets

Investment in S (at cost)

Share capital (Rs. 1 Ord.).

Fair value adjustment of depreciable assets

Investment in S (at cost)

Share capital (Rs. 1 Ord.).

13 Other Fair Value Adjustments

Subsidiary CoPost Acquisition

SN1 Intra Group Sales

SN2 Unrealized Profit on Intra Group Sales

SN3 Extra Depreciation on Fair Value adjustment of

SN6 Impairment of goodwill

SN7 Adjustment Profit and allocate value of NCI

Balance brought forward

GOODWILL IMPAIRMENT UNDER IAS 36

Net identifiable assets, and

Statements of financial position as at 31 December 2009

Net Current Assets

Equity and Liabilities

Investments: Shares in Glass Ltd

Capital and reserves

The following points are relevant.

Following additional information is also available: -

W-2 Cost of control account

W-1 Group structure

W-1 Group structure

W-2 Cost of control account

W-4 NCI goodwill

W-1 Group structure

W-4 NCI goodwill

EQUITY AND LIABILITIES

Equity and liabilities

W-2 Cost of control account-SL

Equity and liabilities

Total equity and liabilities

W-9 adjusting entries

Equity and liabilities

W-6 Opening retained earnings

W-3 Cost of control account-AIL

Equity and liabilities

Profit before tax

Attributable to: - NCI

W-5 Opening retained earnings-GL

W-2 Cost of control account

W-4 Opening retained earnings/General Res

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