Group Accounts The Consolidated Statement of Financial Position (2a) - ACCA (FA) lectures
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24 Comments
A
Andre·
prof. Moffat, quick question on goodwill
Can goodwill arise on acuisition of a newly incorporated subsidiaries? Say, David Cameron left UK government and incorporated business that was immediately acquired by MIcrosoft, would there be a possibility for goodwill recognition?
Thank you
C
Chris·
Did you not see example 1?
It seems logical that there will be some defined criteria as to what would justify the implementation of any fair value adjustment in such a circumstance.
Perhaps look up IFRS 13.
H
Himanshu·
If we take 80% of retained earnings
Then why don't we take 80% of assets as well, because that's what we have a right on, not on the whole assest
If we show 100% of the subsidiary assets Doesn't it inflate our assets?
J
John MoffatTutor·
The consolidated SOFP is treating it as one big company showing all of the assets. It shows the finance as being partly provided by the holding company and partly by the non-controlling interest. We take all of the retained earning - part of them are shown as being part of the holding companies holding and the rest are included in the NCI.
N
Nam Anh·
Hi sir, can I ask why the Liabilities are not included in the NCI? Cuz I'm understanding that we're only responsible for 80% of the subsidiary company's assets and liabilities, that's why our liabilities should only be: ours + 80% of S. But I see you add on the total. Hope you can spare some time to answer me. Have a wonderful day !!!
J
John MoffatTutor·
The consolidated accounts are showing it as though there is one big company. In the 'big' company we show the total of all the assets and the total of all the liabilities. The 'big' company is not all owned by the parent and show we show the amount owed to the parent (the equity and reserves) and the amount owed to the non-controlling interest.
N
Nam Anh·
Thank you very much for your fast reply, sir. You have clarified my misunderstanding ! ?
J
John MoffatTutor·
You are welcome :-)
N
NAKATO·
hi John,
Thanks for making me understand consolidation
D
Dorothy·
Please concerning the retained earnings of the NCI, wasn’t the retained earnings for the NCI since acquisition =10000?
If not ,why did you use 8000 please?
J
John MoffatTutor·
I assume you are referring to example 1, in which case the retained earnings of S on their own SOFP are 8,000 and these are all post-acquisition. (and only 20% of them belong to the NCI)
A
Asif·
Greetings. Really great series on Consolidated Statements.
I wanted to ask, why when calculating Goodwill, did you write down share value as $10,000 to subtract from - by checking the SOFP instead of $8,000 (80%) which is the price they paid under Investments? Shouldn’t this be the price the value should be subtracted from , to find the balance of Goodwill ?
Also, when share value for S is shown as $10,000 in the SOFP, is it the fact that the $8,000 (80%) shares bought at incorporation are now worth $10,000 on this date ? Or is it the share worth of all shares including that of the non controlling interest ? If it includes that of the NCI, then why did we have to assume initially their fair value is 2,000 when it is quite obvious : 10,000 - 8,000 (P) = 2,000 (S) being the balance.
J
John MoffatTutor·
The goodwill is the total value of S at the date of acquisition less the value of S on the SOFP at the date of acquistion.
The total value of S at the date of acquisition is the amount P paid for their share (8,000) plus the value of the NCI (which is the other $2,000).
In S's SOFP the share capital is (as always, nothing to do with consolidations) the total nominal value of the shares in issue - there are 10,000 $1 shares.
P
Panagiotis·
Hello Sir - Could you please explain why we include the 20% fair value of non controlling interest under the nc-liabilities?
J
John MoffatTutor·
We don't.
Firstly it is the fair value at the date of acquisition plus the NCI's share of the post-acquisition retained earnings.
Secondly we show it separately because it represents the part of the group's net assets that belongs to the NCI as opposed to that owned by the shareholders of the parent company.
P
Panagiotis·
Thank you for your answer and shed of light on this Sir - much appreciated.
L
longlongwayway·
Thank you so much!! I have been so scared of Group Accounting and decided to come back to FA to really learn it and this has been a life saver! Feeling a lot more confident. I have just completed this and the previous 2 lectures on consolidate SFP and it all makes sense now!
You are the best!
J
John MoffatTutor·
Thank you for your comment :-)
K
Khaula Basheer·
Hi John,thanks for the lecture.I had adoubt regarding th consolidated accounts and the non controlling interest.
Why do we not calculate only 80% of non current Assets,current assets and current liabilities when making a consolidated account?
Can you please clarify that.
J
John MoffatTutor·
Because the consolidated SOFP is showing the group as though it is one big company owning everything.
N
nelde·
hi!
I did not understand this video at all...
watched it over and over again, I am confused why in P's accounts there are non -controlled numbers instead of controlled ? and completely lost where are figures then from P controlled accounts?
J
John MoffatTutor·
Have you watched the lectures on the previous chapters first?
I do not know what you are referring to when you mention 'non-controlled numbers' - I do not use those words and nobody uses those words :-)
P and S are completely separate legal entities and produce their own financial statements. P's SOFP is showing P's own assets and liabilities.
The consolidated SOFP is showing it as if there was one big company - it shows the total of P and S's assets and liabilities just as though it was one big company. However when we come to show the share capital, retained earnings etc., it is there that we show how much of the total net assets belong to shareholders of P and how much of the total belongs to the non-controlling interest.
J
jethnare1·
i do not understand why in the consolidated SFP non-current assets were not calculated as 80% of S plus P's.
J
John MoffatTutor·
Because we are required by accounting standards to show the group as though one big company - so all assets and all liabilities. The fact that 20% of S is owned by the minority is dealt with in the minority interest calculation.
Can goodwill arise on acuisition of a newly incorporated subsidiaries? Say, David Cameron left UK government and incorporated business that was immediately acquired by MIcrosoft, would there be a possibility for goodwill recognition?
Thank you
It seems logical that there will be some defined criteria as to what would justify the implementation of any fair value adjustment in such a circumstance.
Perhaps look up IFRS 13.
Then why don't we take 80% of assets as well, because that's what we have a right on, not on the whole assest
If we show 100% of the subsidiary assets Doesn't it inflate our assets?
Thanks for making me understand consolidation
If not ,why did you use 8000 please?
I wanted to ask, why when calculating Goodwill, did you write down share value as $10,000 to subtract from - by checking the SOFP instead of $8,000 (80%) which is the price they paid under Investments? Shouldn’t this be the price the value should be subtracted from , to find the balance of Goodwill ?
Also, when share value for S is shown as $10,000 in the SOFP, is it the fact that the $8,000 (80%) shares bought at incorporation are now worth $10,000 on this date ? Or is it the share worth of all shares including that of the non controlling interest ? If it includes that of the NCI, then why did we have to assume initially their fair value is 2,000 when it is quite obvious : 10,000 - 8,000 (P) = 2,000 (S) being the balance.
The total value of S at the date of acquisition is the amount P paid for their share (8,000) plus the value of the NCI (which is the other $2,000).
In S's SOFP the share capital is (as always, nothing to do with consolidations) the total nominal value of the shares in issue - there are 10,000 $1 shares.
Firstly it is the fair value at the date of acquisition plus the NCI's share of the post-acquisition retained earnings.
Secondly we show it separately because it represents the part of the group's net assets that belongs to the NCI as opposed to that owned by the shareholders of the parent company.
You are the best!
Why do we not calculate only 80% of non current Assets,current assets and current liabilities when making a consolidated account?
Can you please clarify that.
I did not understand this video at all...
watched it over and over again, I am confused why in P's accounts there are non -controlled numbers instead of controlled ? and completely lost where are figures then from P controlled accounts?
I do not know what you are referring to when you mention 'non-controlled numbers' - I do not use those words and nobody uses those words :-)
P and S are completely separate legal entities and produce their own financial statements. P's SOFP is showing P's own assets and liabilities.
The consolidated SOFP is showing it as if there was one big company - it shows the total of P and S's assets and liabilities just as though it was one big company. However when we come to show the share capital, retained earnings etc., it is there that we show how much of the total net assets belong to shareholders of P and how much of the total belongs to the non-controlling interest.