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CSFP Flashcards

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1
Q

CSFP: Basic Steps

A
  1. P & S Assets and Liabilities
    Ignoring inv in S
  2. P only SC and SP
  3. Goodwill
  4. NCI
  5. RE
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2
Q

General concept: How much of the Sub’s retained earnings is owned by the parent?

A

Movement in Sub’s retained earnings

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3
Q

The basic workings

A

W1 - Group Structure
W2 - S NAs
W3 - Goodwill
W4 - NCI
W5 - RE

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4
Q

NCI: Important thing to remember

A

TWO methods of calculating:

  1. Proportionate
  2. Fair Value
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5
Q

NCI: Where to put the line item?

A

Directly under Retained Earnings

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6
Q

NCI: Basic concept

A

NCI owns some of S, so reduce equity.

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7
Q

NCI method: Fair Value

A

NCI% # S shares in issue
X
S share price (I.e. FV)

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8
Q

NCI method: Proportionate

A

NCI% S EQUITY

(Because NA = Equity)

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9
Q

W3: Goodwill: Calculation

A

FV of consideration

+ NCI @ Acq (FV/Prop)

less: FV S NA @ Acq)

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10
Q

W2: S NA Pro Forma

A

(Looks at equity because equity = NA)

         REP    ACQ   POST ACQ MOV SC SP RE

TOTALS

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11
Q

W2: S NA: Where to find the Reporting Date column figures?

A

The accounts provided (S SFP)

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12
Q

W2: S NA: Where to find Acquisition column figures?

A
  1. SC & SP: SAME AS @ REPORTING
  2. RE: Provided in question
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13
Q

W2: S NA: Where to find Post Acq column figures?

A

Only need TOTAL figure

= difference of Rep & Acq totals

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14
Q

W2: S NA: Which figures go where??

A
  1. Total Acq NAs ->
    a. W3 GW: 3. FV of S NA @ Acq
  2. Post Acq Mov Total ->
    a. W4 NCI: 2. (NCI%) Post-Acq RE
    b. W5 RE: 2. (P%) Post-Acq RE
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15
Q

W3: GW: Which figures go where??

A
  1. **NCI @ Acq ** ->
    a. W4 NCI: 1. NCI @ Acq
  2. Goodwill -> CSFP
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16
Q

W3: GW: Where to find: 1. FV of Cons?

A
  1. Could be in question

Or require workings:

  1. Share-for-share exchange
  2. Deferred cash consideration
  3. Contingent consideration
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17
Q

W3: GW: Working out FV of consideration: Share-for-share exchange: What is it?

A

Parent gives their shares in exchange for the Sub’s shares (I.e. control)

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18
Q

W3: GW: Working out FV of consideration: Share-for-share exchange: Steps

A

Steps:

  1. # S shares acquired (based on P%)
  2. # P shares (issued)
  3. Value P shares (issued)
    (@ Ps share price)

Where they go:

  1. Value P shares issued -> Consideration
  2. (P) Share Capital (at FV) -> CSFP
  3. (P) Share Premium (β) -> CSFP
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19
Q

W3: GW: Working out FV of consideration: Deferred Cash Consideration: Steps

A
  1. Record at Acq AT PV

2. UNWIND
(To PV year on year)

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20
Q

W3: GW:
Working out FV of consideration:
Deferred Cash Consideration:
Step 1: Record at Acq at PV

A
  1. Consideration -> Deferred cash: PV of £ to be received
    (Plus shares given)
  2. Deferred cash -> CSFP Liability
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21
Q

W3: GW:
Working out FV of consideration:
Deferred Cash Consideration:
Step 2: Unwinding deferred consideration

A
  1. Increase (DR) Finance Cost
    NOT Investment
  2. Increase (CR) Deferred consideration liability

DOESN’T effect FV of consideration

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22
Q

W3: GW:
Working out FV of consideration:
Contingent Consideration

A
  1. Record cons at FV
    ( x probability of payment)
  2. CR contingent liability (CSFP)
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23
Q

W3: GW:
Working out FV of consideration:
Contingent Consideration:
What to do with movements?

A

Put in profit/loss NOT consideration

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24
Q

W2: GW: Where to find: 2. NCI @ Acq

A

FV or proportionate method

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25
W3: GW: Where to find: 3. FV of S NA @ Acq?
W2: Total Column S NA @ Acq
26
W4: NCI: Unique thing about it
Both figures are from other workings
27
W4: NCI: Where to find the figures??
1. NCI @ Acq <- W3 2. NCI @ Acq 2. NCI% S PA RE <- **NCI%** W2 Total column PA Mov
28
W5: RE: Where to find figures??
1. 100% P RE <- SFP 2. P% S RE <- **P%** W2 Total Column PA Mov
29
The interesting thing about W4: NCI and W5: RE?
Both take **the same figure** from W2
30
W4: NCI: Where to put the figures??
NCI (total) -> NCI line in CSFP
31
W5: RE: Where to put the figures??
RE: Total -> RE line in CSFP
32
CSFP: Adjustments: Intra-company balances
Remove ALL intra-company balances Payables & Receivables
33
CSFP: Adjustments: Cash in transit
1. Treat cash as received **2. Remove intra-company *receivables* and *payables* ** (The rest of the outstanding balances)
34
CAFP: Adjustments: Unrealised Profits
For the PROFIT ELEMENT: 1. Remove the **inventory** diff (SFP) 2. Lower **RE** of **seller** (W2/W5)
35
CSFP: Adjustments: (Inventory in transit)
(Similar to cash in transit) 1. Add group **inventory** 2. Reduce group **payables** 3. Remove any **PURP** on inventory
36
CSFP: Non-Current Asset PURP
(Basically the same but with PPE) 1. Reduce PPE (By the *profit*) 2. Reduce RE of seller (W2/W5)
37
CSFP: Adjustments: Fair Value Adjustments: Based on what general principle?
Identifiable assets should be brought into the group statements at **fair value** PPE, Inventories, Contingent Liabilities
38
CSFP: Adjustments: Fair Value Adjustments: Process
Adjust **S** NA (**W2**) at **both dates**
39
CSFP: Adjustments: Fair Value Adjustments: Process: If PPE
2. **DEPRECIATE** the change a. @ Reporting b. **Extra line** on W2 c. **Cumulative** from ACQ d. Pro rate
40
CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: Where do you recognise?
**Extra line** on W2
41
CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: How much depreciation
**Cumulative** - ALL since acquisition
42
CSFP: Adjustments: Fair Value Adjustments: Process: PPE: Depreciating the change: What if PPE acquired during the year?
PRO-RATE
43
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process
1. Reduce S’s NA (W2) a. @ both dates b. *Whole liability amounts* c. Xtra line 2. Show **Contingent Liability** on CSFP c. Xtra line
44
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Reducing S Na by how much?
*Whole* (contingent) liability amount
45
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Where do you reduce the NA amount? Which line?
A **new** line
46
CSFP: Adjustments: Fair Value Adjustments: Process: Contingent Liabilities: Process: Which line do you show the contingent liability on the CSFP?
**New** line
47
CSFP: Adjustments: Mid-Year Acquisitions
Pro rate assuming even profits (REs) throughout the year
48
CSPL: Main difference
Additional section underneath (To show ownership): 1. P Profit (**β**) 2. NCI% of **S** profit (S profit only)
49
CSPL: Acquisition during year
Pro-Rate all S results from Acq date **EXCEPT revaluation gain**
50
CSPL: Pro Forma
Revenue COS **-Inv PURP** **-FV adj xtra dep’n** *Gross Profit* Distribution Admin **-GW Impairment** Finance Cost Interest Income **-Div from S** **Associate Impairment** *PBT* Tax *PFY* Reval Gain **Associate** *TCI* **Parent** **NCI**
51
CSPL: Pro Forma: Which (existing) lines can have adjustments??
1. COS 2. Admin 3. Investment Income
52
CSPL: Pro Forma: Potential adjustments in: COS
1. Minus **Inventory PURP** 2. Minus **FV Adj Extra Dep’n**
53
CSPL: Pro Forma: Potential adjustments in: Admin
**GOODWILL IMPAIRMENT**
54
CSPL: Pro Forma: Potential adjustments in: Investment Income
**DIVIDEND from S**
55
CSPL: Pro Forma: The extra lines
1. Associate - Impairment 2. Associate 3. TCI: Parent & NCI
56
CSPL: Pro Forma: Columns
1. Parent 2. Sub 3. Adjustments (Intra group trading) 4. GROUP
57
CSPL: Pro Forma: Adj Column: 2 adjustments
(For intra-group transactions) 1. Intra-Group **Sales:** a. Revenue b. COS 2. Intra-Group **interest**: a. Investment Income b. Finance Costs
58
SCPL: Adjustments: Intra-group trading
E.g. sales, loans, debenture interest, management charges *Remove the expense and income* DOESNT MATTER IF REALISED OR NOT
59
SCPL: Adjustments: Intra-group trading: Realised
STILL ADJUST (Doesn’t later if released or not)
60
SCPL: Adjustments: Unrealised profits: Relates to what?
**GOODS** unsold at year end
61
CSPL: Adjustments: Unrealised profits: Steps
1. Increase *SELLER* **COS** (More cost - less profit) ONE STEP :)
62
CSPL: Adjustments: Group Disposals: Process
1. Calculate **GROUP PROFIT/LOSS ON DISPOSAL** - Separate line item **2. Consolidate** revenue and costs *up to disposal*
63
SCPL: Adjustments: Group Disposals: Group Profit/Loss on disposal working
1. **Proceeds** 2. Add: *NCI** *(100% value)* 3. Less: **NA @ Disp** 4. Less: **Goodwill** *(control)* = GROUP PROFIT ON DISPOSAL
64
SCPL: Adjustments: Group Disposals: Process: Where is group profit/loss on disposal disclosed?
**Separate line item**
65
Associates: Ownership percentage
**20% - 50%**
66
Associates: Where is it disclosed?
**ONLY ONE LINE ITEM** In the CSPL & CSFP
67
Associates: CSFP: Process: General principle
‘Investment in Associate’ (NCA) Adding what P has influence over To their initial investment I.e. add P% of A post acq REs
68
Associates: CSFP: Process: Steps
1. Cost of investment in A 2. P% A PA RE (*Less: 3. GW Imp*) (*Less div received from A*) = INVESTMENT IN ASSOCIATE
69
Associates: CSFP: Process: **What else to remember**
2. P% A PA RE -> **WORKING 5: RE** And **GW imp** goes to W5
70
Associates: CSPL: General process
Add line *directly before* PBT: ‘Share of profits of associate’
71
Associates: CSPL: Process steps
1. P% A profit 2. less: **GW Imp** for the *year* (*less dividend income from A*) = SHARE OF PROFIT OF ASSOCIATE
72
Associates: CSPL: Thing to watch out for
Remove **dividend income from A** (Because would be double-counting as div would be taken from profits already counted)
73
Associates: The one adjustment:
PURPS
74
Associates: PURPS: Big difference
Adjust for **P% only**
75
Associates: PURPS: Process: P sells to A: CSFP
1. Remove from group RE (SFP) 2. Remove from Investment in Associate
76
Associates: PURPS: Process: P sells to A: CSPL
1. Increase COS 2. Reduce Investment Income
77
Associates: PURPS: Process: A sells to P: CSFP
1. Reduce group RE 2. Reduce group inventory
78
Associates: PURPS: Process: A sells to P: CSPL
1. Reduce (DR?) Share of A profit 2. Reduce (CR) group inventory

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