Group Accounts The Consolidated Statement of Financial Position (2c) - ACCA (FA) lectures
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44 Comments
J
John MoffatTutor·
All of it
L
Lisa·
Loved it! I've found it difficult to understand using the Kaplan book, but you made that easy. The Kaplan book threw in Share Premium, which threw me for a loop when I was working through questions, aside from that, thank you so much for helping me tackle this, it's a popular topic on the exam as you said, and now I have no worries about it. I can't thank you enough.
J
Jason·
Hello,
I was wondering if there had been pre-acquisition retained earnings, would we use P's share of the pre-acquisition retained to work out the goodwill or would we just use all of it like we have been doing up to this point?
M
mpho·
hello sir,what do we do in case where the company S has sold goods to company P cash and has made profit out of it, and company P has also sold them goods to the third company outside the group and has also made its own profit?Do we do any adjustments in this case?
J
John MoffatTutor·
No - if they ended up being sold outside the group then the whole profit has been made and no adjustment is needed.
V
van·
For the unrealised profits of 1,200, shouldnt some share of it belong to the NCI?
T
Thenuka·
Dear John,
Shouldn't we add $1,200 to the retained Earnings of 'P' too, because P would have included this as a Purchase and thus understating profit?
Thanks!
J
John MoffatTutor·
No. Had there been no goods left in inventory we would simply remove the amount of the inter-group sales from the total of the groups sales and the total of the groups purchases, and the total group profit would not be affected. We are only removing the 1,200 because that is profit that had been recorded by S but had not been made by the group as a whole because the inventory has not been sold externally.
T
Thenuka·
Understood!
Thank You Very much. ?
J
John MoffatTutor·
You are welcome :-)
M
Muhammed Saleem·
Also in the study text they are mentioning about some mandatory workings. actually do we need them?
J
John MoffatTutor·
Workings are not looked at by anyone in this exam - the exam is all computer based and the computer just marks the answer!
M
Muhammed Saleem·
Sir,
When we are calculating Retained earnings and NCI, PURP should be subtracted seperately after the post acquisition, isn't it?
Eg:- Calculating the NCI for ex7:
FV of NCI 5000
Post acquisition (15000x25%) 3750
8750
Less: PURP (1200)
7550
In our campus they taught in this method. Also in the study text for ex., answers are in this method
I'm totally confused, which is correct??
Please clear my doubt
J
John MoffatTutor·
Questions like this should be asked in the Ask the Tutor Forum and not as a comment on a lecture!
M
Muhammed Saleem·
Sure i'll drop this there
J
John MoffatTutor·
Questions like this should be asked in the Ask the Tutor Forum and not as a comment on a lecture!
E
Elikplim·
Please,I want a clarification on this :
policies are to make a full provision for unrealised inter-company profits, and to treat
goodwill in accordance with IFRS
J
John MoffatTutor·
Both are exactly as explained in the free lectures!
N
NUR HAZIQAH·
Hello sir i wanna ask why we calculated the NCI as 25%/75% and why not simply just 25% from the $15000??
J
John MoffatTutor·
$15,000 is the cost of only 75% of S's shares. Therefore the value of the remaining 25% must be 25/75 x $15,000.
A
Asif·
Splendid well executed lecture, sir !
J
John MoffatTutor·
Thank you for your comment :-)
S
Sabyasachi·
Sir, what do we do in case the fair value of NCI isn't given and there is a case of goodwill. Suppose the subsidiary's capital was 20,000 and the Parent purchases 60% of it for 20,000.
J
John MoffatTutor·
In that case you assume the fair value of the NCI was 40% x 20,000/60%
J
John MoffatTutor·
That is great news - many congratulations :-)
And thank you very much for your comments.
S
Saher·
Do we have Mid-year acquisitions in our syllabus?
J
John MoffatTutor·
Yes, possibly.
B
beti·
what do you mean by bought on incorporation?would you please explain it a bit
J
John MoffatTutor·
The date of incorporation is the date that the subsidiary was created. The parent company will either buy on that date or on a later date (depending on what is written in the question).
U
Ubaid Sardar·
Hello sir
why are we deducting 1200 profit from value of total inventory (13000+7000-1200). At 22:39 minutes.
Thank You .
J
John MoffatTutor·
It is the PURP - the unrealised profit on goods that were sold from S to P that the question says are left in inventory, so that the inventory is valued at the cost to the group.
I do explain this earlier in this lecture.
R
rahmatbakhshi·
Hello sir, I have watched your lecture but I've got a question regarding the PURP: 1- If the seller is the parent so the PURP must be deducted from the Retain Earnings of the parent.
2- If the seller is the subsidiary then the PURP must be deducted from the Retain earnings of the Subsidiary and does not affect the retain earning of the parent.
3- The final adjustment is that we have to deduct the Inventory at cost: (Inventory less PURP) on consolidated SOFP. .
Are the statements above are true and work for any Inter-Group Trading question??
J
John MoffatTutor·
1 & 2 are correct.
However to deal with the PURP in the SOPL, we add it to the cost of sales (which reduces the profit of the group).
K
Khaula Basheer·
Hi John,a doubt regarding the deduction of the unrealised profit in the consolidated statements.Since the goods are sold on credit between P and S why are we deducting unrealised profit when there was no exchange of any money against the goods between the two companies.It was mere change in the ownership of the goods.
J
John MoffatTutor·
Sales are recorded when the sale is made - not when the cash is received. If P sells to S then P will have recorded the sale in their own accounts and will therefore have recorded the profit. P has made the profit, but if any of the goods were not sold externally then the profit on them needs removing in the consolidated accounts.
C
Carine·
Hello Sir.
thank you for all your lectures. I just have a question. If a company is a Group e.g Sunshine Group ¨PLC will the financial statements be prepared same as in these chapters of GROUP ACCOUNTS
I would really appreciate your response,
J
John MoffatTutor·
The individual companies are not groups and prepare their own accounts in the normal way.
If the companies are a group then they are required to also prepare group (or consolidated) accounts and this is explained in my free lectures on group accounts.
H
harshin·
Hii John
If we are deducting the profit of transfering goods from the selling company ,why not it adding back to the profit of purchasing company?.
T
Taurus·
How to deal with the current accounts if it appears in the question?
J
John MoffatTutor·
It is explained in the next lecture!!
T
Teshwar·
1. If the subsidiary sells goods the purp is deducted from retained earning at reporting date??
2. If the parent is the seller then the retained earning at acquisition is deducted from retained earning at reporting date?
J
John MoffatTutor·
Neither statement is correct as you have typed them.
How we deal with the PURP is explained in detail in the lectures.
B
benmartin·
Thank you very much for your help... do you have any material on level 6 financial reporting theory and practice?
J
John MoffatTutor·
Sorry but we only have material for the ACCA and CIMA qualifications.
I was wondering if there had been pre-acquisition retained earnings, would we use P's share of the pre-acquisition retained to work out the goodwill or would we just use all of it like we have been doing up to this point?
Shouldn't we add $1,200 to the retained Earnings of 'P' too, because P would have included this as a Purchase and thus understating profit?
Thanks!
Thank You Very much. ?
When we are calculating Retained earnings and NCI, PURP should be subtracted seperately after the post acquisition, isn't it?
Eg:- Calculating the NCI for ex7:
FV of NCI 5000
Post acquisition (15000x25%) 3750
8750
Less: PURP (1200)
7550
In our campus they taught in this method. Also in the study text for ex., answers are in this method
I'm totally confused, which is correct??
Please clear my doubt
policies are to make a full provision for unrealised inter-company profits, and to treat
goodwill in accordance with IFRS
And thank you very much for your comments.
why are we deducting 1200 profit from value of total inventory (13000+7000-1200). At 22:39 minutes.
Thank You .
I do explain this earlier in this lecture.
2- If the seller is the subsidiary then the PURP must be deducted from the Retain earnings of the Subsidiary and does not affect the retain earning of the parent.
3- The final adjustment is that we have to deduct the Inventory at cost: (Inventory less PURP) on consolidated SOFP. .
Are the statements above are true and work for any Inter-Group Trading question??
However to deal with the PURP in the SOPL, we add it to the cost of sales (which reduces the profit of the group).
thank you for all your lectures. I just have a question. If a company is a Group e.g Sunshine Group ¨PLC will the financial statements be prepared same as in these chapters of GROUP ACCOUNTS
I would really appreciate your response,
If the companies are a group then they are required to also prepare group (or consolidated) accounts and this is explained in my free lectures on group accounts.
If we are deducting the profit of transfering goods from the selling company ,why not it adding back to the profit of purchasing company?.
2. If the parent is the seller then the retained earning at acquisition is deducted from retained earning at reporting date?
How we deal with the PURP is explained in detail in the lectures.