2. More Group Accounts Flashcards
Why do we cancel out intra-group receivable/payable balances in the consolidated SFP?
We are showing the group as one economic entity, and the group cannot owe money to itself
Why might intra-group accounts not agree at year end?
Inventories or cash in transit
What is the method used to adjust for items in transit?
Follow through the transaction to its final destination
What are the two steps to deal with intra-group cash in transit?
Dr Cash
Cr Receivables
Dr Intra-group Payable
Cr Intra-group Receivable
What are the two steps to deal with intra-group goods in transit?
Dr Inventories
Cr Payables
Dr Intra-group Payable
Cr Intra-group Receivable
What is the impact on the group accounts if inventories have been sold between group members at profit?
The buyers inventories will be overstated as the profit is still included in the year end SFP
What is the adjustment for unrealised profit called?
PUP - Provision for Unrealised Profit
What is the calculation for PUP?
Profit on inter-company sale x % of goods still in inventory at year end
If the parent has sold to the subsidiary, what is the adjustment needed?
Dr Retained Earnings of P by PUP
Cr Consolidated Inventories by PUP
If the subsidiary has sold to the parent, what is the adjustment needed?
Dr Retained Earnings of S by PUP
Cr Consolidated Inventories by PUP
What is the calculation for retained earnings, when there is PUP due to the subsidiary selling to the parent?
- Subsidiary retained earnings at SFP date minus subsidiary retained earnings acqn date
- 5 Minus PUP
- Add group share to total parent retained earnings
- Minus group % of any goodwill on impairment
When is goodwill and impairment to goodwill split between parent and NCI, and when is it not?
IS - Full/ fair value method
IS NOT - Proportional method
