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Q1: P has holding of 80% in S. S has holding of 30% in A. P makes sale to A with URP of Rs. 100. What will be the entry in consolidated financial statements?
Q2: P has holding of 80% in S. S has holding of 30% in A. A makes sale to P with URP of Rs. 100. What will be the entry in consolidated financial statements?
Q3: P has holding of 80% in S and holding of 30% in A. S makes sale to A with URP of Rs. 100. What will be the entry in consolidated financial statements?
Q4: P has holding of 80% in S and holding of 30% in A. A makes sale to S with URP of Rs. 100. What will be the entry in consolidated financial statements?
Q5: P has holding of 80% in S and holding of 30% in A. S has holding of 30% in A as well. P makes sale to A with URP of Rs. 100. What will be the entry in consolidated financial statements?
Q6: P has holding of 80% in S and holding of 30% in A. S has holding of 30% in A as well. A makes sale to P with URP of Rs. 100. What will be the entry in consolidated financial statements?
Q7: P has holding of 80% in S and holding of 30% in A. S has holding of 30% in A as well. A makes sale to S with URP of Rs. 100. What will be the entry in consolidated financial statements?
Q8: P has holding of 80% in S and holding of 30% in A. S has holding of 30% in A as well. S makes sale to A with URP of Rs. 100. What will be the entry in consolidated financial statements?
5, 6, 7 and 8 A is a subsidiary. So make the pup adjustment in the selling company and then calculate profits based on that newly adjusted figure
1, 2, 3 and 4 A is an Associate. The easy way to deal with this is always to reduce the associate’s retained earnings by the full value of the pup and then, when you consolidate, you will bring in the group’s share of the associate adjusted profits after tax and that will automatically have satisfied IFRSIC3 saying that the group’s share of any pup arising on a transaction with an associate should be eliminated on consolidation
The alternative way is to calculate the pup arising on the transaction with the associate and debit group retained earnings and credit investment in associate
But method 1 is radically easier
Hope that helps
Can you tell the entries with amounts?
How much amount would be allocated to subsidiaries in 5, 6, 7 & 8?We wouldn’t, in an exam situation, allocate pups to subsidiaries where an associate is involved
Q5 Calculate the pup, reduce the parent’s retained earnings by the full amount of the pup.
Q6 Calculate the pup, adjust in A (the sub-subsidiary S2), calculate the parent’s share of S2 post acquisition retained (54%) and that automatically has adjusted for the group’s share of any pup arising from a transaction involving the sub-subsidiary
Q7 Calculate the pup, adjust in A (the sub-subsidiary S2), calculate the parent’s share of S2 post acquisition retained (54%) and that automatically has adjusted for the group’s share of any pup arising from a transaction involving the sub-subsidiary
Q8 Calculate the pup, reduce the S’s retained earnings by the full amount of the pup. Proceed as normal
Q5 Calculate the pup, reduce the parent’s retained earnings by the full amount of the pup.
Q6 Calculate the pup, adjust in A (the sub-subsidiary S2), calculate the parent’s share of S2 post acquisition retained (54%) and that automatically has adjusted for the group’s share of any pup arising from a transaction involving the sub-subsidiary
Q7 Calculate the pup, adjust in A (the sub-subsidiary S2), calculate the parent’s share of S2 post acquisition retained (54%) and that automatically has adjusted for the group’s share of any pup arising from a transaction involving the sub-subsidiary
Q8 Calculate the pup, reduce the S’s retained earnings by the full amount of the pup. Proceed as normal
Now, let me ask ……. why are you putting yourself (and me!) through this nightmare. This surely isn’t any past exam question and there are enough difficulties in those to keep you going well into the future!
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Thank you so much.
Yes its not a past exam question. But I have to prepare for the worst!
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