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Hi
I’m trying to complete a consolidated P&L question with a subsidary and a foreign subsidary but I don’t know how to approach the consolidation with both?
The question is Parsley,Sage,Saffron:
1. Parsley acquired 70% of Sage’s one million $1 ordinary shares for $6m many years ago. At the acquisition date, the carrying value of Sage’s net assets was $5m, and this was deemed to be the same as their fair value. The non-controlling interest was measured using the proportion of net assets method. Goodwill arising on the acquisition of Sage has never been impaired. On 31 October 20X3, Parsley sold 300,000 of its shares in Sage for $6.5m. The fair value of the interest retained was $9.5m. The retained earnings of Sage were $9m as at 30 April 20X3. The only entry posted in Parsley’s individual financial statements is to record the cash received and to credit these proceeds to a suspense account.2. On 1 May 20X3, Parsley purchased 60% of Saffron’s one million FR1 ordinary shares for FR71m. The non-controlling interest at acquisition was valued at FR29m using the fair value method. At 1 May 20X3, the carrying value of Saffron’s net assets was FR60m but the fair value was FR70m. The excess in fair value was due to an unrecognised brand with a remaining useful economic life of five years at the acquisition date
Would appreciate some guidance
Many thanks
The Sage subsidiary is a partial disposal coming down to a 40% non-controlled associate from a 70% fully controlled subsidiary. Such partial disposals are fully covered both in the course notes and also in the video lectures
The Saffron subsidiary is a simple question involving the calculation of goodwill at both the date of acquisition and again at consolidation date
At 1 May, 2013 it would seem that goodwill has a value of 30m and a 10m brand needs to be brought into the consolidated statement of financial position at the year end
That’s about as much as I can help given the information that you have supplied.
Is there not a printed solution that you could work your way through?
Hi
No unfortunately i do not have the solutions to the mock, the requirement is to prepare consolidated P&L.
Would I need to prepare sage as a consolidation upto the point of the disposal which is 6month from year end?
Do I need to prepare saffron seperately & convert into $ then add to consolidated P&L
I’m also not sure how to treat the following Parsley commenced construction of a head office & financed through General borrowing for cost of $10m. parsley had following loan outstanding for whole year:
10% bank loan $14m
8% loan note $6mAll interest has been expensed to P&L
Many thanks
Consolidate for 6 months, then treat as associate for last 6 months and statement of financial position show Investment in Associate. There’s an example of exactly that in the course notes – and they’re FREE!
Adjust Saffron for any specific adjustments, translate and consolidate
Interest on borrowings? Weighted average (10m / 20m x interest) should be capitalised
Ok?
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