The Ace (ACCA, FIA, HDA, BBA, CAT, CIMA tuition provider in

Chittagong, Bangladesh)

Accounting for Groups, Subsidiaries, Associates and Minority Interest (IAS 27, 28 and IFRS 3)
Applicable Standards IFRS 3: Business Combinations IAS 27: Consolidated and Separate Financial Statements IAS 28: Investments in Associates

GROUP ACCOUNTING Note that the ollo!in" applies to international accountin" standards #IFRS and IAS$% &erminolo"' F( ) Fair value NCI ) Non*controllin" interest +R, ) +nreali-ed pro it C./S ) Cost o /oods Sold 0 Cost o Sales Sub ) Subsidiar' #!ith control1 2 345$ Sub*Sub ) Sub*Subsidiar' #i%e% Subsidiar' o a Subsidiar'$ Assoc ) Associate #!ith si"ni icant in luence1 2) 245$ Reserves ) Shareholder6s e7uit' e8cept or basic share capital #'es reserves include share premiums$

SUBSIDIARIES Applicable Standards IFRS 3: Business Combinations IAS 27: Consolidated and Separate Financial Statements

onso!idated "a!ance S#eet 9e' Components NCI can be measured in t!o !a's: o :easured as share o the net assets o the Sub o At air value :ethod ;<: Share o net assets at reportin" date = NCI "ood!ill > share o "ood!ill impairment loss

:ethod ;2: F( o NCI at ac7uisition = share o post*ac7uisition chan"e in net assets > share o "ood!ill impairment loss

/ood!ill Cost o investment = NCI at ac7uisition

Abu Naser Mohd Helal, BBA, MBA, LLB, B.S , ACCA Finalist, CMA !L III
For more details please call: 088 01194 777 222 !!!"acca#theace"com

The Ace (ACCA, FIA, HDA, BBA, CAT, CIMA tuition provider in
Chittagong, Bangladesh) > F( o net assets o Sub at ac7uisition
o

I NCI is measured as share o net assets o sub1 the "ood!ill calculated is ?ust the "ood!ill attributed to the parent6s share% &here is no "ood!ill attributed to the NCI6s share% I NCI is measured at air value1 a portion o the "ood!ill is attributed to the parent1 and a portion is attributed to the NCI%

@etails on Cost o Investment ,ro essional ees are e8pensed to ,AB in the period the ac7uisition occurs% Chan"es in the value o contin"ent consideration a ter the ac7uisition !ould result in an' liabilit' bein" remeasured1 !ith the chan"e reco"nised in ,AB% /ood!ill and the cost o investment remain unchan"ed% Ad?ustments or Intra*/roup &ransactions Cash*in*transit and inventor'*in*transit can cause "roup receivables and pa'ables not to balance% &o i81 ad?ust the recipient compan'6s accounts as thou"h the cash 0 inventor' has been received% For e8ample1 o For cash in transit1 @r Cash1 Cr Receivables o For inventor' in transit1 @r Inventor'1 Cr ,a'ables

,ro its made rom intra*"roup transactions need to be reversed since 'ou can6t maCe pro its rom 'oursel % o Reduce inventor' 0 non*current assets o bu'er b' the amount o +R, embedded in "oods sold b' "roup entities% o Reduce retained earnin"s o seller b' the amount o +R,% o +R, is onl' calculated or items that are still remainin" !ithin the "roup1 not items that have been urther sold to e8ternal parties% o +R, or non*current assets at a reportin" date is the di erence bet!een #A$ the carr'in" value o the asset b' the bu'er1 and #B$ the carr'in" value o the asset b' the seller had it not been sold% Intra*"roup receivables and pa'ables need to be cancelled out and the' should be matchin"% Intra*"roup loans o &he matchin" asset and liabilit' or the loan needs to be removed% o Accrued interest pa'able at the borro!er needs to be cancelled out !ith the matchin" interest receivable at the lender% o NCI is calculated as per normal in both Consolidated Balance Sheet and Consolidated Income Statement #i%e% both loan amount and loan interest are still included as it is rom the perspective o the Sub$% @ividends are handled in Consolidated Income Statement1 no ad?ustment in Consolidated Balance Sheet re7uired because the ull Consolidated Income Statement #!ithout dividends$ matches the accounts in the Consolidated Balance Sheet%

Abu Naser Mohd Helal, BBA, MBA, LLB, B.S , ACCA Finalist, CMA !L III
For more details please call: 088 01194 777 222 !!!"acca#theace"com

The Ace (ACCA, FIA, HDA, BBA, CAT, CIMA tuition provider in
Chittagong, Bangladesh) ,reparin" Consolidated Balance Sheet :aCe an' air value ad?ustments re7uired #note that Retained Darnin"s need not be ad?usted even i the F( o assets increased because an' chan"e in F( is matched and cancelled out b' /ood!ill !ithin Assets1 because /ood!ill6s Eless net assetsF !ould have included that additional F($%

:aCe ad?ustments or intra*"roup transactions per above% Ad?ust the Investments line o Subtract rom Investments #under ,arent$1 the ori"inal cost o investment in the Sub% o Note that an' loan notes that the ,arent bou"ht rom the Sub should be included as part o the ori"inal cost o investment in the Sub1 and is alread' part o the Investments line in the ,arent6s separate balance sheet% o Note that the Investments #under ,arent$ does not increase !hen the sub maCes pro its1 the Ebene itsF onl' sho! up !hen the statements are consolidated% Add a /ood!ill item o +nder Non*Current Assets !hich either sho!s the ,arent6s "ood!ill #i NCI is measured as share o net assets$ or the ull "ood!ill #i NCI is measured at F($% Share capital o Note that onl' the ,arent6s share capital is included i the share capital o the Subs have not chan"ed% &his is because the conversion o Investments to /ood!ill !ould have eliminated the Sub6s share capital that e8isted at ac7uisition% Compute Retained Darnin"s o D7uals to ,arent6s retained earnin"s = ,arent6s share o post ac7uisition chan"e in net assets > ,arent6s share o "ood!ill impairment #!hich is ull i NCI is measured as share o net assets1 or proportionate i NCI is measured at F($% o Note that ,arent6s share o Sub6s net assets at ac7uisition is cancelled out !ith the ,arent6s Investments item1 !ith the e8cess classi ied as /ood!ill% o Note that an' increase in net assets post ac7uisition is proportionatel' split bet!een the ,arent6s retained earnin"s and the NCI% Add a NCI item o +nder D7uit'% (alue is based on ho! NCI is measured #see above$% o Note that this NCI item includes the NCI6s share o Sub6s net assets at ac7uisition%

onso!idated Inco$e State$ent Ad?ustments or Intra*/roup &ransactions Dliminate sales and purchases #reverse the seller6s revenue and the bu'er6s C./S b' the same amount$ Abu Naser Mohd Helal, BBA, MBA, LLB, B.S , ACCA Finalist, CMA !L III
For more details please call: 088 01194 777 222 !!!"acca#theace"com

The Ace (ACCA, FIA, HDA, BBA, CAT, CIMA tuition provider in
Chittagong, Bangladesh) Dliminate interest paid and received #reverse the pa'er6s interest paid and the pa'ee6s interest received$ For the +R, o "oods that remain !ithin the "roup1 increase the seller6s C./S b' the +R, to reverse the pro it% For +R, due to non*current assets trans erred o &he depreciation char"e needs to be ad?usted i the depreciation char"e a ter trans er is di erent rom depreciation char"e had it not been trans erred% o I the trans er occurred in the current period1 reverse an' pro it0loss on trans er% @ividends rom the Sub to the ,arent are reversed because that is an intra*"roup trans er% ,reparin" Consolidated Income Statement .nl' the Sub6s results a ter ac7uisition should be included in the Consolidated Income Statement% :aCe ad?ustments or intra*"roup transactions% :aCe ad?ustments or F( chan"es to non*current assets% @epreciation char"e needs to be ad?usted to correspond !ith the ne! F(% &he chan"e in the F( "oes into the revaluation surplus account in Consolidated .ther Comprehensive Income% /ood!ill impairment is char"ed to ,AB1 can be put under Admin D8penses o the ,arent% &a8 char"es remain unchan"ed despite "ood!ill impairment or ad?ustments in depreciation because ta8 is assessed on the individual companies% ,ro its attributable to NCI ) NCI share G Sub6s pro it [note: the Sub's profit here does not take into account adjustments to Revenue or COGS due to elimination of intra-group sales purchases! "#$ it does take into account reduced Sub's profits due to reversal of #R%& 't is not consistent treatment ' kno(&) ,ro its attributable to .!ners o the ,arent ) ,arent6s pro it = ,arent6s share G Sub6s pro it #or the balancin" i"ure i la-'$ ,reparin" Consolidated Statement o Comprehensive Income &otal comprehensive income attributable to NCI ) NCI share G Sub6s total comprehensive income &otal comprehensive income attributable to .!ners o ,arent ) ,arent6s total comprehensive income = ,arent6s share G Sub6s total comprehensive income #or balancin" i"ure$ ASSOCIATES Applicable Standard IAS 28: Investments in Associates onso!idated "a!ance S#eet D7uit' method o accountin" is used% Ad?ust the Investments line o Subtract rom Investments #under ,arent$1 the ori"inal cost o investment in the Assoc%

Abu Naser Mohd Helal, BBA, MBA, LLB, B.S , ACCA Finalist, CMA !L III
For more details please call: 088 01194 777 222 !!!"acca#theace"com

The Ace (ACCA, FIA, HDA, BBA, CAT, CIMA tuition provider in
Chittagong, Bangladesh) o Note that dividends received do not decrease the ori"inal cost o investment in the Assoc1 hence it doesn6t impact the Investments line #under ,arent$% It is simpl' booCed as @r Cash1 Cr Income rom shares in associates #,AB$%

Add a non*current asset titled EInvestment in AssociateF o Cost o Investment o = ,arent6s share o post*ac7uisition chan"e in reserves o Assoc o * @ividends paid to ,arent rom Assoc o * Impairment losses o = Boans to Assoc #this is Hrolled in6 rom !hat is a separate line item in the ,arent6s separate balance sheet$ o * +R, i ,arent sold to Assoc Retained earnin"s o Increased b' the ,arent6s share o post*ac7uisition reserves o associate o Bess impairment loss in Assoc o Bess +R, rom purchases0sales bet!een ,arent and Assoc #this needs to be speciall' ad?usted here unliCe the case or Subs because there is no consolidation o Assoc6s accounts into the ,arent6s balance sheet$ Inventor' o Bess +R, i Assoc sold to ,arent .nl' the ,arent6s share o the +R, is eliminated above% D%"% i the ,arent o!ns 345 o the Assoc1 onl' 345 o the ull +R, is eliminated in the entries above% &his is consistent !ith the treatment o Subs !here there is <445 consolidation and <445 o the +R, is eliminated% Assets and liabilities items are not consolidated1 hence no cancellation o an' inter* compan' items #e%"% loans$%

onso!idated Inco$e State$ent Add a line EShare o pro its o associateF immediatel' be ore the "roup6s pro it be ore ta8 #D7uit' method$ o Share o pro its o associate ) /roup6s share o Assoc pro it a ter ta8 > Impairment o Assoc arisin" in the 'ear Cancel an' dividend income received rom the Assoc because that !ould be "rouped to"ether and replaced !ith the EShare o pro its o associateF Ad?ust or +R, #"roup6s share$ o Increase C./S b' the +R, to remove the pro it% No cancellation o Revenues and C./S or sales and purchases bet!een ,arent and Assoc as the income statements are not combined% onso!idated State$ent of o$pre#ensi%e Inco$e Add a line EShare o other comprehensive income o associateF under the ,arent = Sub6s Revaluation Surplus o /roup6s share o associate6s other comprehensive income

Abu Naser Mohd Helal, BBA, MBA, LLB, B.S , ACCA Finalist, CMA !L III
For more details please call: 088 01194 777 222 !!!"acca#theace"com