Reporting Entity & Consolidation Principles IFRS 10 & 11 ACCA P7 2015Mark Fielding-Pritchard1

Consolidation Procedure  required whenever business combination by acquisition of stock results in an investment in stock account on records of acquiring company  never required when business combinations by acquisition of net assets  not required when business combination by acquisition of stock and stock of acquired company liquidated Mark Fielding-Pritchard

Steps in Consolidation Worksheet Procedure at Date of Acquisition Without Non Controlling Interest  enter separate balance sheets of parent and subsidiary  prepare consolidation worksheet adjustments  eliminate subsidiary owners’ equity recognize revaluation increments and decrements  recognize goodwill  complete consolidated column  prepare consolidated balance sheet from worksheet Mark Fielding-Pritchard

Mark Fielding-Pritchard 4 On January 1, 20X1, P purchased all of the capital of S for $150,000. Current ValueBook ValueRemaining Life Inventory$42,500$40,0001 year Land50,00035,000Indefinite Equipment45,00020,00010 years Patent-0-7,5003 years Excess of value over book value $35000 Selected information on S as of January 1, 20X1 follows: Consolidation Procedure

2015Mark Fielding-Pritchard 5 PS Assets Cash$ 33,500 $ 10,000 Accounts receivable, net 100,00027,500 Inventory175,00040,000 Investment in S Co. 150,000 Land200,00035,000 Building and equipment, net 325,00080,000 Patent 7,500 Total assets$ 983,500$200,000 Consolidation Procedure

2015Mark Fielding-Pritchard 6 PSAdjustConsol Cash 33,500 10,000 Accounts receivable, net 100,00027,500 Inventory175,00040,000 Investment in S Co. 150,000 Land200,00035,000 Building and equipment, net 325,00080,000 Patent 7,500 Total assets$ 983,500$200,000 Consolidation Procedure

2015Mark Fielding-Pritchard 7 Accounts payable$ 125,000$ 26,925 Bonds payable, net483,50078,075 Capital150,00050,000 Retained surplus225,00045,000 Total liabilities and Equity $ 983,500$200,000 Consolidation Procedure

2015Mark Fielding-Pritchard 8 PSAdjCons Accounts payable $ 125,000$ 26,925 Bonds payable, net 483,50078,075 Capital150,00050,000 Retained surplus 225,00045,000 Total liabilities and Equity $ 983,500$200,000 Consolidation Procedure

Goodwill Calculation Paid150000Cr Investment Shares(50000)Dr Share Capital S Retained Surplus(45000)Dr Retained Surplus S Fair Value Adjustments(35000)Dr/Cr Individual Assets Dr Inventory 2500 Dr Land Dr Equipment Cr patent 7500 Missing number Goodwill20000Dr Goodwill Mark Fielding-Pritchard9 Comparison of what we paid & what we received in S

2015Mark Fielding-Pritchard10 PSDr. Assets Cash 33,500 10, Accounts receivable 100,000 27, Inventory 175,000 40,000 2, Investment in S Co. 150,000 (150,000) Land 200,000 35,000 15, Building & equip., net 325,000 80,000 25, Patent 7,500 (7500) 0 Goodwill 20, Total assets 983, ,

2015Mark Fielding-Pritchard11 Accounts payable 125,000 26, ,925 Bonds payable, net 483,500 78, ,575 Capital P Company 150,000 S Company 50,000 (50,000) - Retained surplus P Company 225,000 S Company 45,000 (45,000) - Total liab. & Equity 983, , ,500 1,088,500