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December 15, 2016 at 2:07 pm
I have been assigned the responsibility of preparation of consolidated financial statement. The standalone financial statement of both the parent and the subsidiary companies have been audited. While consolidating, I found that the balances of current account of the subsidiary company in the books of parent company and the current account balance of the parent company in the books of subsidiary company were not equal. The reason for that being that the subsidiary company had not reevaluated the balance payable to parent company at the year end using the closing rate (since the transaction was made in foreign currency and was foreign currency monetary item that needed to be revaluated at year end). However, the amount was reevaluated by the parent company correctly. Since the financials have been audited, how will I consolidate the balances since they dont agree with each other? Can I change the amount of profits and the balances in the consolidated financial statements?
November 2, 2015 at 2:22 pm
Please help. I watched all the videos for chap 7 last week but can’t access it and most of the other videos today. The intodution videos work for some reason. I am messaging from my phone because I can’t access this page and chat forums from my computer.
John Moffat says
November 2, 2015 at 2:23 pm
The lectures are working fine. Please go to the support page – the link is above.
October 7, 2015 at 12:04 am
DEFERRED CONSIDERATION ON PARENT ACQUISITION OF SUBSIDIARY
The parent acquired 75% of the subsidiary’s 80 million $1 shares on 1 Jan 20×6. It paid $3.50 per share and agreed to pay a further $108 million on 1 Jan 20×8. The parent company’s cost of capital is 8%. In the financial statements for the year ended 31 Dec 20×6 the cost of the combination will be as follows :
80 m shares * 75% * 3.50 210
$108m * 1/1.08 100
Mr. Little, i can’t figure out how they got 100 on the deferred consideration. To calculate a discount figure, don’t you need the initial investment($108), the cost of capital(8%) and the future cash flows?. Your assistance will be deeply appreciated as usual.
October 7, 2015 at 9:27 am
Not sure why you think we need the future cash flows! Surely we already know them – There will be an outflow of funds in one year’s time of $108 million. The present value of that outflow is $108 million / 1.08 cost of capital
Does that not make sense to you?
October 8, 2015 at 2:08 am
Thank You Mr.Little
November 11, 2015 at 4:45 pm
The PV of deferred consideration should be $50 because the payment is in two year`s time.
November 11, 2015 at 4:50 pm
Sorry, it should be $92.59 (108/1.08^2)
November 11, 2015 at 5:20 pm
Olalekan, you’re right. I’m just wondering whether the dates in the original question from Joseph were correct
October 6, 2015 at 4:34 am
Dear admin, it says the video was not found in this server. Also I cheeked the video all other browser (Firefox, Opera, Explore, Chrome and Safari) and it says the video is not available.
October 6, 2015 at 6:16 am
The video is working fine – the problem must be to do with your internet provider. Please ask on the support page (the link is above).
October 6, 2015 at 7:34 am
your provider or office is blocking access to vimeo.. try TOR browser
September 23, 2015 at 1:33 pm
how do I download the audio lectures
September 23, 2015 at 1:52 pm
Our lectures can only be watched online. It is the only way that we can keep the website free of charge.
March 1, 2015 at 6:53 am
This lectures can be used for June 2015 exams. right?
January 30, 2015 at 10:38 am
Ch#8, example 1; notes (i) what does that mean. I am not understanding cash transit.
December 15, 2014 at 6:14 pm
I am a little confused as to why no adjustments are made to Jurate regarding the 10,000 worth of goods sold to Doville? Shouldn’t Jurates Inventory decrease by 10,000 and cash increase by 10,000 aslo ………Please someone if they can help
December 16, 2014 at 9:05 am
The question indicates that the transaction has already taken place and has therefore already been recorded
July 28, 2014 at 6:38 am
Thank you sir.
July 28, 2014 at 3:53 am
I am confused in the example 1 regarding not entering receivable 30+30 of Jurate and 20 of Dovile; and in the same way trade payable 50+10 of Jurate in the CS of FS.
July 28, 2014 at 4:15 am
Sorry sir, I have asked the wrong question.
My confusion is Receivable 90-30 of Jurate and payable 50+10 of Dovile.
Why have not we included in the CS of FP?
July 28, 2014 at 5:26 am
Because when we consolidate the group accounts are presented as those of a single company. The amounts owed by / to Dovile / Jurate are effectively owed by a company to themselves.
It’s like saying that your left trouser pocket owes your right trouser pocket $5,000. So, does that make you $5,000 richer?
July 25, 2014 at 1:18 pm
Dear Mike Sir,
I have a small doubt in the Mini Exercise Question (Page 203, Paper F7, Question # 3 Patricija & Sergejus) It is the ques of ‘share exchange’ case at the time of calculating Goodwill.
My doubt is- While calculating the FV of TNA of this Subsidiary @ doa, how have you calculated Ret. Ear b/f. as 3.5 million ? I understand it is the mid-yr acquisition, so its supposed to be 6/12. But don’t we do 6/12 * 6.5 million which will be 3.25 million?
On 1 November, 2009 Patricija acquired 60% of the 4 million $ equity shares of Sergejus in a share exchange of two shares is Patricija for three shares in Sergejus. At the date of acquisition shares in Patricija had a market value of $6 each.Sergejus pro?t for the year ended 30 April, 2010 was $3 million and retained earnings at that date were $6.5 million. At the date of acquisition, the fair values of Sergejus‘ assets were equal to their carrying amounts with the exception of an item of plant which had a fair value of $2 million is excess of its carrying amount. The non-controlling interest is to be accounted for at fair value. For this purpose, the fair value of the goodwill attributable to the non-controlling interest is $1.5 million, and goodwill is not impaired as at 30 April, 2010.
Please solve this doubt.
Thanks a lot,
July 25, 2014 at 3:37 pm
“profit for the year ended 30 April, 2010 was $3 million and retained earnings at that date were $6.5 million.”
OK, of that $6.5m, $3 was retained THIS YEAR. Therefore, at the start of this year, the retained earnings figure must have been $3.5m and that is entirely pre-acquisition. Now, this year’s retained earnings are $3m and half of that was achieved pre-acquisition
So total pre-acquisition retained earnings are $3.5m + (6/12 x $3m) giving a total of $5m
July 25, 2014 at 4:00 pm
Yes! Thank you very much, Mike Sir.
The same issue, I was facing in the Ques # 7 of the same Mini Exercise. And now that is clear too 🙂
July 25, 2014 at 4:02 pm
Good! Remember, the more you practice, the easier these questions become!
April 20, 2014 at 3:42 am
I hope someone can help me with this!
in example 1, when doing the FV at DOA why inventory 60k,cash 20k,receivables 70k and non-current assets Tangible of 150k are not included in the answer?
Is it because they are current assets?
Do we only include Non-current assets? Because in chapter 7 example 11 page 46we included Non-dep non-cur assets and Dep non-cur assets.
I am confused now, can someone help me please?
April 27, 2014 at 4:02 pm
In example 1, the DOA happened at incorporation of the subsidiary. Therefore, there was no retained earnings or anything brought forward from before. Since the company was “born” on the date of acquisition, it did not had any inventory/cash/etc to be adjusted to.
In example 11 of chapter 7, the DOA was 2 years ago which is why it had depreciation/inventory etc.
Hope this helps 🙂
March 18, 2014 at 4:01 pm
how can I watch online? I have logged in but I can’t watch the video except introduction video
March 18, 2014 at 4:25 pm
The lectures are working fine – it must be a problem at your end.
Have you looked at the technical support? The link is above (just below the video)
January 22, 2014 at 3:21 pm
i found this in practies note questions and i can not under stand
(1) Included in receivables of August are amounts owed by Scone of $75,000. The current accounts do not at present balance due to
a payment for $39,000 being in transit at the year end from Scone.
i know i will cancel 75 of receivables A with payaples S
but about cash transit . cash of A will incret another side?
January 22, 2014 at 5:05 pm
Deal with the in-transit item first. So, in A’s records (on the face of the question) Dr Cash and Credit Receivables with the $39,000 in transit. That now leaves $75,000 – $39,000 receivable from Scone and that’s the same amount in Scone’s records shown as payable to August.
So now cancel from Total Receivables and from Total Payables the amount of $(75 – 39) $36,000
January 22, 2014 at 5:36 pm
yes thanks mr mike
December 3, 2013 at 4:00 pm
Sir, please tell me if Im right!
If P sells to A, then SFP treatment is to deduct P’s share of PURP from the RE, and the same amount is deducted from the investment in associate. SOCI treatment is to add the amount to cost of sales of P
If A sells to P, then SFP treatment is to deduct P’s share of PURP from the RE, and the same amount will be deducted from the group inventory. SOCI treatment is to add the amount to the cost of sales of P
October 20, 2013 at 8:15 pm
its great and very helpful
September 10, 2013 at 12:35 pm
“OpenTuition” has “opened my intuition”
fatema qutbuddin says
August 18, 2013 at 5:41 pm
how can i download these videos?
August 27, 2013 at 3:41 am
You cannot download ’em. They are flash videos.
August 10, 2013 at 3:11 pm
Hi Mike, i am on page 48 of chapter 8. I am referring to the answer for example 1 . Just wondering why is the retained earning W3, the pre-acqn re is nil? In what circumstances in the exam question that we assume its nil? I hope u understand my question. Thank u. Btw, greattttttt video. Loving it.
August 10, 2013 at 4:55 pm
Sorry, just realized p acquired s on its incorporation. Hehehe.
May 8, 2013 at 1:23 am
Brilliant! Thank you.
April 22, 2013 at 6:07 am
Why in example 1 consolidated SOFP we do not include receivable of dovile and payable of jurate(in excess)??
October 27, 2012 at 8:10 pm
h I forgot to say …back of BPP Text book
October 27, 2012 at 8:09 pm
I am confused! I thought that as long as goods are sold it is not deducted in the Consolidated income statement! Looking at Question 11 Fallowfield……only half of goods remain..why was the entire 40000 deducted?….Help
September 10, 2012 at 4:35 pm
guys when u have inter co revenue, and they mention in the exercise :”the current account in that day of the transaction was…xxx.”u need to adjust Group A/R and Group Liabilities when you consolidate by minusing in both acounts the same xxx mentioned, as is an inter co revenue, is not payable and is not collectable.Just fyi!
July 7, 2012 at 8:40 pm
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