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  1. i was also questioning whether the subsiduary that you no longer control is consolidated and in that case surely you would no longer call it a subsiduary as a subsiduary company is a company that you control, would you then class this as an associate…this is not made very clear in the lecture and if a question did come up in the exam it would be very helpfull to know.

    Thankyou

    • “the subsiduary that you no longer control” is a contradiction in terms! It cannot be a subsidiary if you no longer control it because a subsidiary is defined as “an entity controlled by another entity”

      This will never come up in an F7 examination (maybe it would come up in P2). Would you class it as an associate? It depends what sort of influence your (say) 60% of the shares has in the eyes of a liquidator!

      I think you’re asking the question “Even though we may have 60% of the shares and 60% of the votes, in the circumstance where we are no longer in control, do we treat the investee as an associate?”

      The answer really depends on the circumstances behind your loss of control. If it’s because a liquidator has been appointed to liquidate the subsidiary, then you would no longer consolidate and you would revalue your investment (possibly even to $zero)

  2. Dear sir, you said that a subsidiary is an entity controlled by another entity and the parent need to prepare consolidated FS.

    But considering the examples of >50% of voting rights but not in control due to loan from third party and the third party now has the control over the board, does the subsidiary still consider as the our subsidiary or the third party subsidiary? Do we still need to prepare consolidated FS for the subsidiary? Or will the Lender of the Loan become the new parent of the subsidiary and need to prepare the consolidated FS?

  3. Many thanks for the valuable resources you’re providing for all members of this forum. I have a question regarding the consolidation of the retained earnings, since you consolidate the part of the retained earnings that was accumulated after the acquisition date, then what will happen to the part was accumulated before the acquisition ?
    the other question why we exclude the pre-acquisition part of the retained earning from the consolidated retained earning while it represent part of net equity we have paid our money for ?

    Thanks.

  4. great lecture just want to make sure i got this right, if the parent company has effective control of the subsidary then consolidated accounts are prepared but if they own more than 50% of shares but does not have effective control, what is the accounting treatment?

  7. Thanks for your lecture. But I have some quries . For example, If a partnership company start incorporate a new Ltd company with current partners and employees , do we need to prepare consolidated statement?

  9. thank you Mike.Then in example 1 for group acounts why are we not consolidating the recivables ,cash ,inventory for the parent and subsidiary because we only considered the parents figures.Or is that we add both after incoporation.I thought invery would be (8+4),cash (4-3)+1and Receivables(6+2).

  10. i want to know that if preparing the interim statement if you are using the half year results of the subsidiary then for the parent company which results do you use .Is it also the half year results or the whole year.

    • @despina, First I must say the lecture is great. Thanks
      I got a bit confused right at the end or the lecture. Reporting disimilar activities. The lecture ends with preparing group accounts until we reach minimum 75% of the profits or revenue or assets for the group. I would thing the remaining 25% is material to the qroup and has to be reported also?

      • @despina, I believe this has nothing to do with group accounts – this is segmental reporting.

        the remaining <25% is shown as "the remainder" so no attempt is made to disaggregate the figure

    • @nigs001, Only if they have ( effective ) control.

      Control is the key so, even though the parent may own MORE than half the votes, if they no longer have control ( eg the subsidiary is in liquidation and therefore the liquidator controls it ) then the parent will not consolidate.

      Under the new IFRSs, where a parent has effective control, then they should consolidate. So, if the parent owns say 40% of the voting power of the subsidiary and the remaining 60% is spread out over many other shareholders, then the parent has effective control.

      Steve Scott is not likely to ask this in a numerical part of question 1 but could ask it within the ( say ) 5 mark written part b

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