Group Financial Statements

Question 1

What do Group Financial Statements report?

Answer 1

The performance and position of an entire economic entity (the group) as if it were a single business.

Question 2

What is the Group Structure in accounting?

Answer 2

An organisational pyramid headed by a parent company that controls or influences other businesses in the group.

Question 2

Name the 3 main types of entities in a group structure.

Answer 2

Subsidiaries, Associates, and Joint Ventures.

Question 2

How are subsidiaries included in group financial statements?

Answer 2

By consolidation, adding together their assets, liabilities, income, and expenses with the parent.

Question 3

How are associates and joint ventures included in group financial statements?

Answer 3

Using equity accounting, reflecting the parent’s share of profits and net assets.

Question 4

What is a ‘non-controlling interest’ (NCI)?

Answer 4

The portion of a partially-owned subsidiary’s net assets and profit not owned by the group.

Question 5

What is goodwill in group accounting?

Answer 5

The excess paid over the fair value of identifiable net assets when acquiring a subsidiary; subject to impairment.

Question 6

What is a bargain purchase gain?

Answer 6

Negative goodwill when the acquirer pays less than fair value; recognised as income at acquisition.

Question 7

How are cash flows from associates and joint ventures shown?

Answer 7

Only as dividends received, not combined line-by-line with group cash flows.

Question 8

What is the aim of group accounting?

Answer 8

To present the financial position and performance of the entire economic entity, showing the group as a single business.

Question 9

Why are intragroup transactions eliminated in group financial statements?

Answer 9

To avoid distorting the group’s overall dealings with external parties.

Question 10

How are subsidiaries accounted for in group financials?

Answer 10

Through consolidation—combining 100% of their assets and liabilities and splitting profit between parent owners and NCI.

Question 11

How are associates and joint ventures accounted for?

Answer 11

Using equity accounting, reflecting only the parent’s share of their post-acquisition performance.

Question 12

What are company (separate) financial statements?

Answer 12

The parent company’s own financials, showing investments in group entities as single assets.

Question 13

How is an investment in a subsidiary shown in the parent’s separate statements?

Answer 13

As an investment asset, often carried at cost, fair value, or using equity accounting.

Question 14

Why don’t separate financial statements show the true group position?

Answer 14

Because they hide the combined assets, liabilities, and performance of the entire group.

Question 15

Because they hide the combined assets, liabilities, and performance of the entire group.

Answer 15

A comprehensive view of the group’s combined resources and obligations.

Question 16

What is the purpose of consolidation in group financial statements?

Answer 16

To report the performance and position of the entire group as a single economic entity by combining parent and subsidiaries and eliminating intragroup transactions.

Question 17

In consolidation, are a subsidiary’s assets and liabilities added?

Answer 17

Yes. 100% of the subsidiary’s assets and liabilities are added to the group statement of financial position, even if the parent owns less than 100%.

Question 18

Why is the share capital of a subsidiary not added during consolidation?

Answer 18

Because it’s an intragroup item—owned by the parent—and including it would double-count equity.

Question 19

How are partially-owned subsidiaries handled in consolidation?

Answer 19

100% of their assets and liabilities are consolidated, and the portion not owned by the group is shown as Non-Controlling Interest (NCI) in equity.

Question 20

In the group income statement, how is profit from partially-owned subsidiaries split?

Answer 20

Between the owners of the parent and the Non-Controlling Interests (NCI).

Question 21

At what value are subsidiary assets and liabilities measured in consolidation?

Answer 21

At their fair values at the date of acquisition.

Question 22

What is Goodwill in consolidation?

Answer 22

he excess of the purchase price over the parent’s share of the fair value of identifiable net assets at acquisition.

Question 23

How is Goodwill treated after acquisition?

Answer 23

It’s not amortised but tested annually for impairment. If impaired, it’s written down through profit or loss.

Question 24

What is a Bargain Purchase in consolidation?

Answer 24

When the purchase price is less than the fair value of identifiable net assets. This results in a gain recognised in profit or loss at acquisition.

Question 25

How is the group cash flow statement prepared?

Answer 25

By adding the cash flows of the parent and subsidiaries, eliminating intragroup flows, and showing cash flows from acquisitions or disposals separately.

Question 26

What is an example of an accounting irregularity in consolidation?

Answer 26

Not consolidating controlled entities to mislead stakeholders.

Question 27

What is the method used to account for associates and joint ventures in group financial statements?

Answer 27

Equity accounting.

Question 28

What defines an associate in a group structure?

Answer 28

A business over which the parent has significant influence, typically with 20%-50% shareholding.

Question 29

What defines a joint venture in a group structure?

Answer 29

A business over which the group has joint control under a joint control agreement.

Question 30

How is the investment in an associate or joint venture initially recognised?

Answer 30

At acquisition cost on the group statement of financial position.

Question 31

In equity accounting, how is the parent’s share of profit or loss recognised?

Answer 31

As one line in the profit or loss section of the group statement of comprehensive income.

Question 32

How is the parent’s share of Other Comprehensive Income (OCI) from an associate recognised?

Answer 32

In the OCI section of the group statement of comprehensive income.

Question 33

What is Total Comprehensive Income (TCI)?

Answer 33

The sum of profit and Other Comprehensive Income (OCI).

Question 34

How is the investment asset adjusted post-acquisition in equity accounting?

Answer 34

Acquisition cost + share of post-acquisition TCI - dividends received.

Question 35

Do cash flows paid by the parent to acquire associates/joint ventures appear in investing or operating activities?

Answer 35

In the investing activities section as cash outflows.

Question 36

How are dividends from associates and joint ventures reflected in the group statement of cash flows?

Answer 36

Only the dividends received are shown; the associate’s cash flows are not added line-by-line.

Question 37

How does equity accounting differ from consolidation?

Answer 37

Equity accounting recognises the group's share of profit/OCI and adjusts the investment asset, while consolidation aggregates all items line-by-line.

Question 38

In the Group Statement of Cash Flows, how are the cash flows of parent and subsidiaries (including partially-owned ones) treated?

Answer 38

They are added together line-by-line, with intragroup cash flows eliminated, reflecting the group as a single economic entity.

Question 39

Why are intragroup cash flows eliminated in the Group Statement of Cash Flows?

Answer 39

To ensure the statement reflects only cash flows with external parties and presents the group as one unified business.

Question 40

Are cash flows from associates and joint ventures added line-by-line in the Group Statement of Cash Flows?

Answer 40

No, only dividends received from associates and joint ventures appear in the statement, under ‘dividends received’.

Question 41

How are dividends from associates and joint ventures reported in the Group Statement of Cash Flows?

Answer 41

Only the cash dividends received by the group are shown in the investing activities section as ‘dividends received’.

Question 42

How are cash flows related to acquiring or disposing of subsidiaries, associates, or joint ventures reported?

Answer 42

As cash outflows (for acquisitions) and cash inflows (for disposals) in the investing activities section of the Group Statement of Cash Flows.

Question 43

How is the treatment of subsidiaries’ cash flows different from that of associates and joint ventures in the group cash flow statement?

Answer 43

Subsidiaries’ cash flows are consolidated line-by-line (after eliminating intragroup flows), while only dividends from associates and joint ventures are reported.

Question 44

What is the purpose of eliminating intragroup transactions in the Group Statement of Cash Flows?

Answer 44

To avoid double-counting and show only cash flows with outside parties, accurately reflecting the group’s cash movement.

Question 45

When the group acquires or disposes of an associate or joint venture, where is this cash flow reported?

Answer 45

In the investing activities section as either cash outflow (acquisition) or cash inflow (disposal).