F7 Group Accounts: Comprehensive Example

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F7 Group Accounts: Comprehensive Example

Agne acquired 72% of the equity shares of Dace on 30 June 2009 for $250,000.

On 31 August 2009, the Statements of Financial Position were:

1. At the date of acquisition, some of Dace’s inventory had a fair value $16,000 in excess of its carrying value. All had been sold before the year end.
2. On 31 July 2009, Dace had sold an item of property, plant and equipment to Agne realising a profit on sale of $20,000. Agne was depreciating this item over its remaining useful life of 4 years. It is group policy to charge a full year’s depreciation in the year of purchase, and none in the year of sale.
3. On 29 August, Agne had despatched goods to Dace at a transfer value of $26,000. Agne sells goods at a mark up of 30%. Dace had sold a quarter of these goods by the Statement of Financial Position date.
4. The current accounts did not reconcile at the year end because Dace had sent a payment of $5,000 to Agne, but Agne only received it on 3 September 2009. Before any necessary adjustment, the intra group balance in Dace’s records showed an amount owing to Agne of $12,000.
5. Goodwill is impaired by 25%.
6. Both entities have declared but not yet accounted for a dividend of 5c per $1 share.
7. The directors valued the nci at $87,667 at date of acquisition

Prepare a Consolidated Statement of Financial Position for the Agne Group as at 31 August 2009.


  1. avatar says

    Thanks for the nice lecture, dear tutor!
    What I find confusing is the fact that 4 000 post acq is divided again by 10 and 2 months. I consider they relate to
    the 2 months post acq period and there is no need to apportion them again on a time basis.
    I understand FV adjustment of 20 000 and 16 000.
    Thank you!

  2. avatar says

    Good Morning

    You indicated that the new thinking is that we cannot assume that dividends accrued proportionately/evenly throughout the year and the logic seems sound however in the question above we apportioned the earnings pre and pos acqui so we new how the profits occured. Why then didnt we apportion base on a percentage?

    Im refering to the dividends receivable W3

    • Profile photo of MikeLittle says

      @EDR, Hi

      We HAVE to apportion the profits for the year in a mid-year acquisition situation and, unless directed otherwise, we sensibly will do it on a time basis.

      However, ( apparently! ) that is not sufficient justification to treat the dividends as accruing on the same basis. It USED to be the case that dividends were treated as accruing on an even basis over time – but that principle has changed.

      Whether you understand / accept the thinking behind the change …. it really doesn’t matter – sorry! Just accept it! I’ve had to!

    • Profile photo of MikeLittle says

      @haidernchd, It was. The 40,000 brought forward was entirely pre-acquisition, so not time apportioned. The 24,000 this year is time-apportioned in the workings – 19,333 pre-acquisition and 4,667 post-acquisition

  3. avatar says


    Have to say a BIG thankyou – your explainations and especially the W1/W2/W3/W4 and PUPs breakdown of the calculations make so much more sense to me than the way my lecturer taught me. I feel a lot more confident tackling consolidate statements now.


      • avatar says


        My exam is actually tmw morning – Im finishing off my degree through the Uni of South Africa, and our final paper on Consol FS (ACN3704) is more similiar to P2 than F7 really iro of group complexity – wish I had started on OpenTutution sooner instead of battling on with the explainations giving by UNISA. But nonetheless its great when those pieces of the puzzle finally make sense and you go “aahh now i get it” :)

        Many thanks again to great online lectures, you do a really great job!

  4. Profile photo of zubang5933 says

    When we calculate proft for the year in goodwill,why do we need to subtract “on TNCA tranfer” 20000 in order to get ‘normal profit’,isn’t Dace had sold the item and realise the profit on 31 July 2009(after the date of acquisation,30June2009) and thus is not related to fair value of SNA@DOA?

  5. avatar says

    the lecturer started his answer from the last paragraph, my question is : if he started from the 1st paragraph will he get the same result or different one.
    i tried it myself but became a bit confused.

    • Profile photo of MikeLittle says

      @niko123, No, the answer will be the same! Most times, the paragraphs in a question are not interdependent. That is, you can prepare a working for each paragraph in isolation, and then fasten your whole answer together. I tend to start with the last paragraphs because they tend to be the most straightforward and require the least effort / thought

    • Profile photo of MikeLittle says

      @mkamuna, 20,000 is added back to the 2 months’ profit because the question specifically says that the 20,000 profit arose from a ( one-off ) sale to Agne in the post acquisition period ie in the 2 months

      16,000 fair value adjustment of 16,000 means that the profits for the first 10 months are understated ( if closing inventory value increases, so also does the profit figure increase ). So, at the end of ten months, as at date of acquisition the inventory value needs to be increased by 16,000. Now, that closing inventory at the end of 10 months is also the opening inventory at the start of the final 2 months. That increase in opening inventory represents an increase in the cost of those 2 months’ sales.

      Effectively, we’re moving 16,000 profits from the final 2 months into the first 10 months


      • Profile photo of MikeLittle says

        @mmonie, You’re correct mmonie. What surprises me is why babyjane couldn’t find it! The question clearly says that both companies have proposed a dividend of 5c per share, and that’s the ONLY thing it says about dividends. So what was the problem babyjane? How come you couldn’t see that?

  6. avatar says

    On PUP in TNCA, the way the calculations have been arrived at are very confusing. I thought the idea of removing 20,000 from TNCA is to bring back the value to cost and then consequently removing the ‘fake’ profits in the books of the seller? In the books of the buyer, Agne
    is definetely overcharging Dpn, instead of the normal 20,000 , it’s 25,000.This means profits are reduced by 5000 and consequently TNCA by 5,000. So why netting off these figures (20,000 -5000) in the books of the seller only ? Please someone help.

    • Profile photo of MikeLittle says

      @221522152215, recent change in rules! The justification is that the 5,000 is actually realised over the period the buyer uses it. So, as each year goes by, the relevant excess depreciation is realised and so the pup is reduced

  7. avatar says

    In this example,Pre-acquisition dividend can’t be subtracted from cost of investment because it is argued that there is no justification that profits do accrue evenly throughout the year.But in this very same example, when calculating pre-acq profits for 10 months, it is assumed that profits have accrued evenly throughout 12 months. Can somebody explain please? I really don’t understand the explanation in the lecture.

    • avatar says

      @rawasia, u r rite bro , v add share of post acq in W4……. but here its a loss !!! wat u r confusing were all profits that v used to add … if nci takes its share of profit than it must also take its share of loss i-e in this case (20.333) .

  8. avatar says

    While looking /listening to the ans for this qn our excellent tutor has written some figures together but do not understand the basis at all.Why has the cost of the acquition by Agne obtained by adding the value of investment by Agne to the value of NCi??Thought you handle the two separately???Why can’t i just take the figure of 250000 from the qn?
    Please help here

    • Profile photo of MikeLittle says

      @acnca, Steve Scott ( and Graham Holt at P2 level ) has indicated that there is a “correct” way to calculate goodwill and therefore a “correct” layout.

      That’s why it is done the way it is in the video

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