2: Consolidated Statement of Profit or Loss (CSPL)

Question 1

What must you do to the consolidated statement of profit or loss if the subsidiary is acquired during the period? (<12 months)

Answer 1

Pro rate

Question 2

What is the rule for the statement in regards to…

Intra group transactions?

Answer 2

They must be eliminated in full

Question 3

What are the two things the CSPLOCI represent?

Answer 3

Ownership and control

Question 4

How does the SPLOCI reflect control?

Answer 4

By combining the results of the parent with the results of the subsidiary (for the number of months it has been a subsidiary)

Question 5

How does the SPLOCI reflect ownership?

Answer 5

By non-controlling interests being separately presented in the statement of profit or loss and other comprehensive income

Question 6

By how many months can the parent and subsidiary’s year ends be within each other to consolidate.

Answer 6

3 Months

Question 7

What is the rule for the statement in regards to…

Accounting policies?

Answer 7

They must be uniform between parent and sub.

Question 8

How do you consolidate revenue?

Answer 8

• 100% parent
• 100% subsidiary (even if you own less than 100% of its shares)
• less the total of intercompany sales between the two entitles

Question 9

How do you consolidate revenue for mid year acquisitions?

Answer 9

▪ 100% parent
▪ 100% subsidiary (even if you own less than 100% of its shares) x number of months it was controlled
▪ less the total of intercompany sales between the two entitles

Question 10

What two factors must be represented in cost of sales?

Answer 10

PURP adjustments we make in

• Retained earnings
• NCI

Question 11

How do you consolidate cost of sales?

Answer 11

• 100% parent
• 100% subsidiary (even if you own less than 100% of its shares) x n/12 if midyear acquisition
• less the total of intercompany sales between the two entitles (irrespective of whether in inventory at the end of the year)
• plus, the unrealised profit on inventory (ONLY if the items remain in inventory at the yearend)

Question 12

What is the rule with dividend payments?

Answer 12

Dividends paid by the subsidiary to the parent should be eliminated upon consolidation from the parent’s investment income.

Question 13

What are dividends paid by the subsidiary to the parent know as?

Answer 13

Intra-group investment income

Question 14

If we have an impairment to goodwill, what must this be included as?

Answer 14

As an increase to administrative expenses.

Question 15

If we have an fair value adjustment, where must we adjust this?

Answer 15

Adjusted at cost of sales unless told its admin expense.

Question 16

What is the rule with Additional depreciation?

Answer 16

Will only relate to the subsidiaries assets so will always affect the NCI
calculation

Question 17

What is the rule with PURP when the parent sells to the subsidiary?

Answer 17

The profit made is 100% group so no adjustment to NCI arises.

Question 18

What is the rule with PURP when the subsidiary sells to the parent?

Answer 18

The profit made by the

subsidiary is partially owned by the group and partially owned by the NCI shareholders.

Question 19

Is the associate consolidated into the P+L?

Answer 19

No?

Question 20

Why is the associate not consolidated into the P+L?

Answer 20

Because it is not controlled.

Question 21

What is the double entry for Investment in associate?

Answer 21

DR Investment in associate

CR Cash

Question 22

What is the associate unrealised profit calculation?

Answer 22

PURP (calculated as normal) x group share

Question 23

What is the double entry when Parent sells to the associate?

Answer 23

Dr Group cost of sales (cancel profit on goods still in the group)
Cr Investment in associate (reduce goods to cost to the group)

Question 24

What is the double entry when Parent sells to the associate?

Answer 24

Dr Share of profit of associate (cancel profit on goods still in the group)
Cr Group inventory (reduce goods to cost to the group