Advanced Financial Accounting Lec-37

Group Accounts

Control Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Control The parent company has owned more than 50% of subsidiary company (Each ordinary share capital has one voting right). The parent company has power over more than 50% of the voting rights of subsidiary company by virtue of agreement with other shareholders of it. The parent company has power to govern the financial and operating policies of subsidiary company by statute or under an agreement. The parent company has power to appoint or remove a majority of the directors of subsidiary company. The parent company has power to cast the majority of votes at meetings of the board of directors of subsidiary company.

Consolidated Accounts Consolidated balance-sheet. Consolidated income statement.

Assets = Owner’s equity + Liabilities

Owner’s Equity Share capital. Reserves.

Assets Current assets. Non current assets.

Liabilities Current liabilities. Non current liabilities.

Question Balance sheet As on 31 Dec. 2008 P (Rs) S (Rs) Fixed assets 1,000 400 Investment in S 500 ---- Current assets 200 Total Assets 1,900 600 Share capital 1,200 300 Reserves Current liabilities 100 Total liabilities & capital The data will appear row wise But after appearance each individual amount will be highlighted

Question The parent Co. (P) acquired 100% shares of the subsidiary Co. (S) on 31st December 2008. Required: Prepare the Consolidated Balance Sheet as on the same date.

Consolidated Balance Sheet Solution Consolidated Balance Sheet As at December 2008 (Rs) Fixed assets 1,400 Current assets 600 Total assets 2,000 Share capital 1,200 Reserves 500 Current liabilities 300 Total liabilities & capital The data will appear row wise but with highlighter

Balance Sheet As on 31st December 2008 Question Balance Sheet As on 31st December 2008 P (Rs) S (Rs) Fixed assets 1,000 400 Investment in S 500 ---- current assets 200 Total Assets 1,900 600 Share capital 1,200 300 Reserves 150 Current liabilities Total liabilities & capital The data will appear row wise But after appearance each individual amount will be highlighted The parent Co. (P) acquired 100% shares of the subsidiary Co. (S) on 31st December 2008. Required: Prepare the Consolidated Balance Sheet as on the same date.

Consolidated Balance Sheet Solution Consolidated Balance Sheet As at December 2008 (Rs) Fixed assets 1,400 Goodwill 50 Current Assets 600 Total assets 2,050 Share capital 1,200 Reserves 500 Current liabilities 350 Total liabilities & capital The data will appear row wise but with highlighter

Goodwill Cost of investment 500 Net assets of S Co. Acquired (450)