# Preparation of CS of Comprehensive Income Example 1

1. says

Struggling with f7 just finding it hard to get head round what is actually happening. So I understand example one we are showing the consolidated profit and loss of the two companies. so yes we add the revenues and the cost of sale together of the two companies. And yes I understand we do not include the 2k dividend from the subsidiary as we are just moving funds from one company to another. Again we add the two taxes together same as revenue and cost of sales. It’s the final two parts I do not understand why do we only use the parent company proposed dividend of 5k and not the subsidiary of 2.5k?Also why do we suddenly add on the NCI of 700?

• says

Ok! By the time we arrive at “Profit after tax” we have finished the consolidated statement of profit or loss, so dividends and nci are not shown within that statement.

However, for the purposes of illustrating that the sopl can be reconciled with working W3 for the statement of financial position (consolidated retained earnings) I have deducted the parent’s own dividend and I have deducted the nci’s share of the subsidiary’s profit after tax.

You will NOT be asked to do this in the exam. Both the recognition of the dividend and the allocation of the nci’s share of this year’s subsidiary profit after tax are shown in the consolidated statement of changes in equity and that is not in the F7 syllabus

Just a small note of warning – you ARE required to show as a note to the csopl and as a note to the csoci the nci’s share of each of those statements but the values are not deducted from the figures within those statements

Ok?

2. says

Hi Sir,

Kindly explain where the \$ 2,500 (div S) is coming from when calculating w3. The question states the Dividend from S is \$ 2,000! Its really confusing.

3. says

hello sir what is the difference between comprehensive income and profit and loss? i thought this was the profit and loss?

• says

Statement of profit OR loss (not “and” loss) reflects the day to day business activity results of the company

Statement of comprehensive income reflects gains and losses n shareholders’ funds that are not attributable to trading / business activities

• says

so which bit is the comprehensive income? and which bit is the profit or loss? im confused because what your saying is the comprehensive income is what I considered to be a profit and loss i.e revenue minus cogs etc…

4. says

Hello, sir. I have a question regarding w3 in the lecture.

When calculating W3, under Mantas’s column, don’t we need to add 2500*80% ? because Manta is supposed to be given a share of dividend distributed by Rochas?

Thanks

5. says

Hi Mike.
I am confused with this question, regarding the dividends. In the course notes as well as in my text book, it is stated that both the nci and the dividends are to be shown in the statement of changes in equity an not in the income statement. I take that to mean whether proposed or declared div, so why are you including it? Now I don’t know what is the correct income format to write in the exam

6. says

Great Lectures Sir Mike! Thanks so much!
Regarding pup. Why do we reduce the unrealised amount from COS as opposed to from revenue? Wouldnt that distort (overstate) the sales figure (even if profit would be correct either way)? Wouldnt it be more informative to reduce the amount from the sales figure since it is this number that has been overstated with the hopes of making a profit and not the COS figure that has been understated? I can never wrap my head around this logic, any help would be greatly appreciated!!

• says

No! We reduce revenue and cost of sales by the intra-group trade, so that eliminates the overstated revenue that is concerning you.

The adjustment for pup is actually an adjustment to group closing inventory that is overvalued by the value of the pup.

And closing inventory is an element involved in the calculation of cost of sales.

Your post talks of “reduce the unrealised amount from COS” We don’t! We add it to cost of sales. It’s important that you remember that! A reduction in the value of closing inventory means that cost of sales increases and therefore profit decreases – which is what we were trying to achieve when we decided we needed a pup

OK?

• says

I think its clear, at least more so than before! Thanks for taking the time to individually reply to all our questions!!!!

7. says

I can’t access this video for some reason. It says page not found. It was working fine and now the page is gone?

8. says

Wonderful lecture!
Thank you Open Tuition and Sir Mike. I would like to ask though, would I miss one mark for accidentally deducting the URP from Revenue, instead of the preferred treatment of adding it to Cost of Sales? I mean the result for the Profit would be the same but Revenue would be underestimated.

9. says

this is a continuation of the previous question, to let you know i’, referring to the CSofCI eg 1

10. says

11. says

hello sir,

could you kindly guide me as from where have you got the qn to solve this comprehensive example

• says

@sattar786, Hi, I made the question up myself. To be honest, it’s probably more difficult than you’re likely to meet in a real F7 exam

• says

@ sattar786, question used in this lecture is example 1 of chapter 10 from the notes.

12. says

hi sir, thanks you for this great explanation. i just have a little problem, when we include the proposed dividend 5000 in income statement, we also need to include it in current liability in SOFP. but isnt this against IAs rule, (stating that we should not include proposed dividend)

• says

@evanuom, Hi, I believe that the question specifies that the dividend HAS need declared / proposed BEFORE the year end and is therefore correctly accounted for as a liability.

However, it’s a good point which you make and you need to watch out for this type of subtle nuance in exam questions

• Hi Mike,
What is this subtle difference?

when should a proposed/declared dividend be accounted for as a liability and when not? Is there a difference between proposed and declared?

Thank you

13. says

hi sir, thanks you for this great explanation. i just have a little problem, when we include the proposed dividend 5000 in income statement, we also need to include it in current liability in SOFP. but isnt this against IAs rule, (stating that we should not include proposed dividend)

thank u for anaswering,

• says

@evanuom, You only need to submit your questions once – they don’t have a better chance of being answered just because you post multiple times!