[rustamov123]

Lets assume this example :

– B/F Retained Earnings
Parent : 100k; Subsidiary 50k
– P profit for the year (including 4k from S) :30k
– S profit for the year (including 4k expense): 20k

SOFP shows retained group earnings increase: 30k + 15k (20×75%) = 45

However, SPL adjustments give us :
– P Profit : 26 (deducting 4 income)
– S Profit : 24 (Adding back expense)

So, group revised increase should be:

26 + 18k (24×75%) = 44

So, how these 2 figures are the same ? I do not understand, sir (

[rustamov123]

Sir, if we make adjustments in SPL, then the effect of the change would be:

A) Highveldts Profit for the year is reduced by 6000

B) Samsons Profit for the hear increased by 6000

This gives us the net effect of : (-6000) + (6000)*75%

So, based on Spl figures we would add less from Highveldts and More from Samsons profits to group r.e

Sir, please show me comparative example with sofp and spl adjustments. I am really confused here (

[rustamov123]

So, that means that after accounting for 6k finance income, we have to eliminate that in consolidated sofp. But this has not been done.

Sorry for being disturbing. I just do not understand the reason why we dont change retained earnings figures. Had we calculated the consolidated SPL then the effect of correction for intra group items would be :

B/F Retained earnings + (Parent’s Retained earnings – 6000) + (Subsidiary’s Retained earnings + 6000)×share of ownership

Then this gives us totally different closing retained earnings from SOFP.

[rustamov123]

Sir, why then in this question we add income to R.E of Parent and retain the expense in subsidiary ?

Included in Highveldt Co’s investments is a loan of $60m made to Samson Co at the date of
acquisition. Interest is payable annually in arrears. Samson Co paid the interest due for the year on
31 March 20X5, but Highveldt Co did not receive this until after the year end. Highveldt Co has not
accounted for the accrued interest from Samson Co.

[rustamov123]

For example : we say that

“In Consolidated P/L we eliminate intra group dividend income, expense or finance income/expense” i.e if P receives X amount from S, both of them eliminate those figures.

Then why dont we reduce income/expense from retained earnings. I do not understand that how do we come to same figures in Con.SOPL and Con.SOFP by different methods ?

[rustamov123]

Hi, Sir.

If we took loan interest as an income in Parent and expense in Subsidiary, doesn it give us the wrong figure for retained earnings ?

You said that, intra group items will be removed from Consolidated SOCI. But here we have to find the retained earnings attributable to parent. And if the expense is taken into account, and providing that both of them are in the same group, why we did not just increased subsidiarys retained earnings ?

Please, can you explain me the reason behind ?

[rustamov123]

Thank you very much for your response. But had the question asked if there is an impairment, then the answer would have been No? Because CV is lower than market value.

[rustamov123]

Thank you so much. Your endeavours are helping so many people. May God helo you on your way!

[rustamov123]

I have watched them very carefully 🙂

What confuses me is that we have not dismissed him during the year and sacked him off after the year end. Year end is September, we dismissed him in October and litigation started in November. The BPP says that if litigation starts after the year end , disclose 🙁

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