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  2. Hi Mr Mike,

    I am trying to solve this question in Kaplan revision kit and I got very confused now. Why is the share capital in their answer shown as (20,000+16,000)?!! This 16,000 is the shares acquired in S which is (24,000 /3 * 2) but didn’t we learn that only the Parent’s share capital is what appears in the final consolidated SOFP? I am confused here.

    Also, as per equity accounting, when there is an associate and a sub as well, we are supposed to consolidate the associate, are we in this question consolidating the associate? I mean we have only included its profit and we showed it as an investment in the balance sheet, Shouldn’t we add up its Assets, liab etc..? I understand that most likely we don’t have control in an associate case, yet equity accounting says that we should consolidate it when there is a sub owned as well, did we consolidate it in our answer here? and if not, why didn’t we consolidate it, equity accounting does say that it should be consolidated it in such case, doesn’t it?

    Thanks a lot Mr Mike.

    Maha

    • Hello – Just wanted to update that I have already figured out the answer to the first part of my question, which is that we simply issued more shares in the parent company as a consideration and that’s why we recorded them. It is not a recording of the shares acquired in the sub (which is what mainly confused me earlier) but it is a recording of issue of shares.

      Maha

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