Group Companies

Question 1

W1

Answer 1

W1 - Group Structure

P owns X % of S. Acquired on X date
NCI = Y%

Question 2

W2

Answer 2

W2 - Net Asset of Subsidiary

Share capital ; Reporting ; Acquisition; Movement

Retained earnings; Reporting; Acquisition; Movement

Total

Question 3

W3

Answer 3

W3 - Good will

Consideration
Add: NCI % net assets at acquisition
Less: Total net assets at acquisition (W2)

Good will at acquisition x

(Impairment of goodwill)

Good will at reporting date

Question 4

W4

Answer 4

W4 - Non controlling interest

NCI% of net assets at acquisition (W2)
NCI% of post acquisition profits (W2 - total movement)

Total

Question 5

W5

Answer 5

W5 - Group retained earnings

100% of parent company
P’s % of S’s post acquisition movement (W2)
Good will impairment

Total

Question 6

Creation of group accounts is an example of?

Answer 6

Substance over form; whilst they are both separate legal entities, they are recognised as a consolidated company

Question 7

What is the DE in Ps accounts following an acquisition of shares in S

Answer 7

Dr Investment (NCA)
Cr Cash

Question 8

When are group accounts required?

Answer 8

When one entity has control over another (>50% of ordinary shares) , meaning P is in effect able to manage S as if it were a department of P

Question 9

What are the steps to consolidate SFP

Answer 9

1. Consolidate 100% of assets and liabilities, excluding investment in S
2. Include only Ps SC and SP in equity
3. Consolidate all of Ps RE but only Ps share of S’s RE post acquisition (W5)
4. If P does not own 100%, reflect in equity how NCI owns a proportion of net assets