1. Impairment of goodwill
Other CIS adjustment
Impairment of goodwill
The current impairment is to be recognized
as expenses in the CIS.
NCI valued at fair value method, NCI should be adjusted:
NCI%*S’s profit after tax X
NCI% impairment (X)

2. Fair value (E.G: value of S’s non-current assets have been subjected to a fair value uplift)
The extra depreciation is to be recognized as expenses in the CIS.

3. NCI will need to be adjusted for their shares:
NCI%*S’s profit after tax X
Additional depreciation following FV uplift (X)

4. Mid-year acquisition
If the subsidiary is acquired during the accounting year, it is therefore necessary to apportion its profit for the year between pre-acquisition and post-acquisition elements.
Only the post-acquisition figures are included in the CIS.

5. Dividends
Only dividends paid by P to its own shareholders appear in the CFS.
Any dividend income show in the CIS must arise from other than those subsidiaries or associates.

6. Example: Dividends
P Co acquired 60% of the $100,000 equity of S Co on 1 April 20X5. The income statements of the two companies for the year ending 31 Dec 20X5 are set out below.

7. P Co
S Co
S (9/12)
Sale revenue
170,000
80,000
60,000
Cost of sales
65,000
36,000
27,000
Gross profit
105,000
44,000
33,000
Other income (dividend received S)
3,600
Administrative expenses
43,000
12,000
9,000
Profit before tax
65,600
32,000
24,000
Income tax expense
23,000
8,000
6,000
Profit for the year
42,600
18,000

8. Note
P Co
S Co
Profit for the year
42,600
24,000
Dividends (paid 31 Dec)
12,000
6,000
Profit retained
30,600
18,000
Retained earnings brought forward
81,000
40,000
Retained earnings carried forward
111,600
58,000
Required
Prepare the consolidated income statement and calculate group retained earnings and NCI in equity.

9. Solution : CIS
Sale revenue (170+60)
230,000
Cost of sales (65+27)
92,000
Gross profit
138,000
Administrative expenses (43+9)
52,000
Profit before tax
86,000
Income tax expense (23+6)
29,000
Profit for the year
57,000
Profit attributable to:
Owners of the parent
NCI
49,800
7,200

10. Solution: Group retained earnings
P’s retained earnings brought forward
81,000
Group profit for the year
49,800
Dividends paid
Group retained earnings
(12,000)
118,800

11. Solution :
CSFP
P’s retained earnings
111,600
P’s% sub’s post-acquisition retained earnings (18,000-6,000)*60%
7,200
Group retained earnings
118,800

12. Solution : NCI in equity
S’s share capital
100,000
Retained earnings brought forward
40,000
Profit Jan-March 20X5
6,000
Net
146,000
NCI share 40%
58,400
Profit attributable NCI
7,200
Dividends paid
(2,400)
NCI (present in CSFP)
63,200

13. Solution :
CSFP
Net
146,000
NCI share 40%
58,400
sub’s post-acquisition retained earnings (18,000-6,000)*40%
4,800
NCI (present in CSFP)
63,200

14. Summary: NCI (Present in CIS)
NCI% * subsidiary’s profit after tax X
NCI% fair value depreciation (X)
NCI% PURP (Sub=seller only) (X)
NCI% impairment (fair value method) (X)
NCI (present in CIS) X

15. Consolidated statement of comprehensive income (CCI)
The only items of other comprehensive income that are included in F7 syllabus are revaluation gains and losses, so a CCI will be easy to produce once you have done the CIS.
The format of CCI.

16. A recommended format of CCI
S made a X2 revaluation gain one of its properties during the year or P made a Y revaluation gain one of its properties during the year .
Profit for the year X1
Other comprehensice income:
Gain on property revaluation X2(Y)
Total comprehensive income for the year X1+X2(Y)

17. Profit attributable to:
Owner of the parent X1-X4=X5
NCI X4
Total comprehensive income attributable to:
Owner of the parent X5+X2*P%+Y
NCI X4+X2*S%

18. CCI (separate statement)
S made a X2 revaluation gain one of its properties during the year or P made a Y revaluation gain one of its properties during the year .
Profit for the year X1
Other comprehensice income:
Gain on property revaluation X2(Y)
Total comprehensive income for the year X1+X2(Y)

19. Total comprehensive income attributable to:
Owner of the parent X5+X2*P%+Y
NCI X4+X2*S%
X5= Profit attributable to owner of the parent
X4= Profit attributable to NCI