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    Chapter 17 Consolidated FS - Part 1

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    Erwin Labayog Medina
    This document provides an overview of consolidated financial statements. It discusses key topics like basic consolidation procedures, intercompany transactions, complex group structures, and related accounting standards. The learning objectives, definition of terms, and preparation requirements for consolidated financial statements are outlined. The document also describes the steps for consolidation at the acquisition date and subsequent dates, including eliminating investments in subsidiaries, adding similar line items, analyzing effects of transactions, and allocating profit/loss to owners and non-controlling interests.

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    Chapter 17 Consolidated FS - Part 1

    Uploaded by

    Erwin Labayog Medina
    555 views29 pages
    This document provides an overview of consolidated financial statements. It discusses key topics like basic consolidation procedures, intercompany transactions, complex group structures, and related accounting standards. The learning objectives, definition of terms, and preparation requirements for consolidated financial statements are outlined. The document also describes the steps for consolidation at the acquisition date and subsequent dates, including eliminating investments in subsidiaries, adding similar line items, analyzing effects of transactions, and allocating profit/loss to owners and non-controlling interests.

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    CHAPTER 17 CONSOLIDATED FS - PART 1

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    This document provides an overview of consolidated financial statements. It discusses key topics like basic consolidation procedures, intercompany transactions, complex group structures, and related accounting standards. The learning objectives, definition of terms, and preparation requirements for consolidated financial statements are outlined. The document also describes the steps for consolidation at the acquisition date and subsequent dates, including eliminating investments in subsidiaries, adding similar line items, analyzing effects of transactions, and allocating profit/loss to owners and non-controlling interests.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    555 views29 pages

    Chapter 17 Consolidated FS - Part 1

    Uploaded by

    Erwin Labayog Medina
    This document provides an overview of consolidated financial statements. It discusses key topics like basic consolidation procedures, intercompany transactions, complex group structures, and related accounting standards. The learning objectives, definition of terms, and preparation requirements for consolidated financial statements are outlined. The document also describes the steps for consolidation at the acquisition date and subsequent dates, including eliminating investments in subsidiaries, adding similar line items, analyzing effects of transactions, and allocating profit/loss to owners and non-controlling interests.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 29

    (Advanced Financial

    Accounting and Reporting


    Part 2)
    LECTURE AID

    2017

    ZEUS VERNON B. MILLAN

    AFAR PART 2: Zeus Vernon B. Millan


    CONSOLIDATED FINANCIAL
    STATMENTS
    Overview on the topic:
    Chapter Title Sub-topics___
    17 Consol. FS (Part 1) Basic consolidation procedures

    18 Consol. FS (Part 2) Intercompany transactions


    19 Consol. FS (Part 3) Miscellaneous topics
    20 Consol. FS (Part 4) Complex group structure

    Related standard:
    • PFRS 10 Consolidated Financial Statements
    • PFRS 12 Disclosure of Interests in Other Entities
    AFAR PART 2: Zeus Vernon B. Millan
    Chapter 17 CONSOLIDATED FS (Part 1)

     
    Learning Objectives

    • State the elements of control.


    • Prepare consolidated financial statements
    at the acquisition date.
    • Prepare consolidated financial statements
    at a subsequent date

    AFAR PART 2: Zeus Vernon B. Millan


    Definition of terms (PFRS 10)

    • Parent – an entity that controls one or more entities.


    • Subsidiary – an entity that is controlled by another
    entity.
    • Group – a parent and its subsidiaries.
    • Consolidated financial statements – the financial
    statements of a group in which the assets, liabilities,
    equity, income, expenses and cash flows of the parent
    and its subsidiaries are presented as those of a single
    economic entity.
    AFAR PART 2: Zeus Vernon B. Millan
    Preparation of Consolidated FS

    • A parent entity is required to present consolidated


    financial statements, except when all of the following
    conditions are met:
    a. The parent is a subsidiary of another entity and all its
    other owners do not object to the parent not presenting
    consolidated financial statements;
    b. The parent’s debt or equity instruments are not traded in
    a public market (or being processed for such purpose);
    and
    c. The parent’s ultimate or any intermediate parent
    produces consolidated financial statements that are
    available for public use and comply with PFRSs.

    AFAR PART 2: Zeus Vernon B. Millan


    Elements of Control

    • Control exists if the investor has all of the following:


    1. Power over the investee;
    2. Exposure, or rights, to variable returns from its
    involvement with the investee; and
    3. The ability to use its power over the investee to affect
    the amount of the investor’s returns.

    AFAR PART 2: Zeus Vernon B. Millan


    Elements of Control

    AFAR PART 2: Zeus Vernon B. Millan


    Accounting requirements

    • Consolidated financial statements shall be prepared using uniform


    accounting policies.
    • The financial statements of the parent and its subsidiaries used in
    preparing consolidated financial statements shall have the same
    reporting dates. (The maximum difference in reporting dates is 3
    months.)
    • Consolidation begins from the date the investor obtains control of
    the investee and ceases when the investor loses control of the
    investee.

    AFAR PART 2: Zeus Vernon B. Millan


    Measurement

    • 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.

    • Investments in subsidiaries are accounted for in the parent’s


    separate financial statements either:
    a. at cost;
    b. in accordance with PFRS 9 Financial Instruments; or
    c. using the equity method.

    AFAR PART 2: Zeus Vernon B. Millan


    NCI in net assets of the subsidiary

    • Non-controlling interests shall be presented in the consolidated


    statement of financial position within equity, separately from
    the equity of the owners of the parent.

    • Non-controlling interest in the net assets consists of:


    1. The amount determined at the acquisition date using PFRS 3; and
    2. The NCI’s share of changes in equity since the acquisition date.

    AFAR PART 2: Zeus Vernon B. Millan


    NCI in profit or loss and comprehensive income

    • The profit or loss and each component of other


    comprehensive income in the consolidated statement of
    profit or loss and other comprehensive income shall be
    attributed to the following:
    1. Owners of the parent
    2. Non-controlling interests

    AFAR PART 2: Zeus Vernon B. Millan


    Preparing the Consolidated financial statements

    • Consolidated financial statements are prepared by


    combining the financial statements of the parent and its
    subsidiaries line by line by adding together
    similar items of assets, liabilities, equity, income and
    expenses.

    AFAR PART 2: Zeus Vernon B. Millan


    Consolidation at date of acquisition
    1. Eliminate the “Investment in subsidiary” account. This
    requires:
    a. Measuring the identifiable assets acquired and liabilities
    assumed in the business combination at their acquisition-
    date fair values.
    b. Recognizing the goodwill from the business combination.
    c. Eliminating the subsidiary’s pre-combination equity accounts
    and replacing them with the non-controlling interest.
    2. Add, line by line, similar items of assets and liabilities of the
    combining constituents.

    AFAR PART 2: Zeus Vernon B. Millan


    Consolidation subsequent to date of acquisition

    Step 1: Analysis of effects of intercompany transaction


    Step 2: Analysis of net assets
    Step 3: Goodwill computation
    Step 4: NCI in net assets computation
    Step 5: Consolidated retained earnings computation
    Step 6: Consolidated profit or loss computation
    Step 7: Computation for profit or loss attributable to the
    owners of the parent and to NCI

    AFAR PART 2: Zeus Vernon B. Millan


    Step 1: Analysis of effects of intercompany transaction

    • This is relevant when the parent and subsidiary had


    intercompany transactions during the period or in the
    previous periods. This is discussed in the next chapter.

    AFAR PART 2: Zeus Vernon B. Millan


    Step 2: Analysis of net assets

    (a)
    This amount is used for computing goodwill in ‘Step 3’.
    (b)
    This amount is used for computing NCI in net assets in ‘Step 4’.
    (c)
    This is used for computing consolidated retained earnings in ‘Step 5’.
    AFAR PART 2: Zeus Vernon B. Millan
    Step 3: Goodwill computation

    Formula #1: NCI is measured at NCI’s proportionate share

    AFAR PART 2: Zeus Vernon B. Millan


    Step 3: Goodwill computation (continuation)
    Formula #2: NCI is measured at fair value

    AFAR PART 2: Zeus Vernon B. Millan


    Step 4: Non-controlling interest in net assets

    *This amount is zero if NCI is measured at proportionate share. Goodwill is


    attributed to NCI only if NCI is measured at fair value.

    AFAR PART 2: Zeus Vernon B. Millan


    Step 5: Consolidated retained earnings

    AFAR PART 2: Zeus Vernon B. Millan


    Step 6: Consolidated profit or loss

    AFAR PART 2: Zeus Vernon B. Millan


    Step 7: Profit or loss attributable to owners of parent and NCI

    *FVA is fair value adjustments.

    AFAR PART 2: Zeus Vernon B. Millan


    Consolidated Statement of Financial Position

    AFAR PART 2: Zeus Vernon B. Millan


    Consolidated total assets

    AFAR PART 2: Zeus Vernon B. Millan


    Consolidated total liabilities

    AFAR PART 2: Zeus Vernon B. Millan


    Consolidated total equity

    AFAR PART 2: Zeus Vernon B. Millan


    • (APPLICATIONS: PROBLEM 16-2: #’s 1 & 2)

    AFAR PART 2: Zeus Vernon B. Millan


    OPEN FORUM
    QUESTIONS????
    REACTIONS!!!!!

    AFAR PART 2: Zeus Vernon B. Millan


    IFA PART 1A: Zeus Vernon B. Millan
    END

    AFAR PART 2: Zeus Vernon B. Millan

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