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Probably only where one company pays dividend or interest to the other. But not something to worry about for the exam. 🙂
Example of transaction that would be eliminated = inter-company dividend, removed from S’s divs paid and from P’s divs received.
🙂
Yes. Revised notes to be published in June.
For now, leave chapters 2, 7, 27 until new notes published.
🙂
Method:
1. Prepare separate cash flows for P and S in their respective currencies. Everything balances. 🙂
2. Translate S’s cash flow at average rate.Everything still balances. 🙂
3. Consolidate (i.e. add the 2 cash flows together) Everything still balances. 🙂
Examinability:
Surely not practical to examine in numbers! What a relief!
Here are your two calculations. They give different answers . Both are logical. The accounts will blalnce either way. I have read commentaries suggesting there is little consensus on this issue.
In the exam, they should mark both methods right (remember that your numbers don’t have to agree precisely to the model answer; they are really assessing your explanations).
Above all, don’t spend ages on this point. 🙂
Example 5 in Article
NA + GW at disposal = 535 + 90 = 625
Change in NCI = 10 / 100 x 625 = 62.5
PS If I had a vote, I prefer the second answer.
Adjustment in equity = 65 – 62.5 = 2.5
Dr Cash 65 Cr NCI 62.5 Cr Equity 2.5
Alternatively:
NCI at disposal = 210 + 30 /100 x (535 – 480) = 226.5
Adjustment in equity = 65 – (10/30 x 226.5) = 10.5
Dr Cash 65 Dr Equity 10.5 Cr NCI 75.5
Hessian Group PAID 80m in cash
AND
Hessian Group effectively RECEIVED 9m (the cash that Natural brought with it.
So the net OUTFLOW is 80m – 9m = 71m.
Hope that’s what you are expecting.
🙂
PS – Try and use a more helpful thread header – e.g. Cash flow
Please read our notes and watch the lecture again. Then please ask me specifically which point you need to clarify.
New material after June exam.
BUT use existing notes lectures to get to grips with groups and the accounting standards
When new notes are published send me a message here to identify changes – they won’t be huge 🙂
P sells £100 sausages to S. P has receivable of £100.
S trades in $. Exchange rate $2 = £1.
S will credit payables with $200.Assume exchange rate moves to 3 at year end.
S retranslates payable to $300.So P has receivable of £100 and S has payable of $300.
Then translate all of S at 3.
Now P has receivable of £100 and S has payable of £100.Now cancel out, and have a cup of tea.
🙂
Your understanding is perfect.
Sub has a foreign transaction – fx difference on the payable in its P&L
Then Parent translates all of assets and liabilities (including the payable) of sub ; fx difference in OCI
Finally inter-company balances will cancel out (well, hopefully 🙂 )
Very sorry but we only deal with exam queries. (I assumed you were lessor because youu talked about amounts received).
In the exam they are only going to ask about the year end position – they don’t test the boOk-keeping.
FYI:
Finance lease – cash received credited to net investment in lease account
Operating lease – normal accruals accounting for rental income
ANSWER GIVEN ONLY FOR EXAM PRUPOSES
In the exam they are only going to ask about the year end position – they don’t test the boOk-keeping.
FYI:
Finance lease – cash received credited to net investment in lease account
Operating lease – normal accruals accounting for rental income
ANSWER GIVEN ONLY FOR EXAM PRUPOSES
No retranslation of NCI number.
NCI will take a share of the exchange differences on the net assets.
And IF USING FULL GOODWILL (not partial) then NCI will take a SHARE of the XD on goodwill.
Don’t forget to watch lecture again if necessary.
🙂
IMPORTANT POINT
Share price 100
Transaction cost 3Fair value = 100
We aren’t actu;ally selling it at the SFP date, so transaction cost is not relevant for the valuation.
LESS IMPORTANT POINT
(If there are several markets – e.g. US, China – you are supposed to consider transaction costs when making a decision about which market, BUT YOU STILL IGNORE THEM IN THE FINAL VALUATION).
Please post in the ACCA ethics module Ask the Tutor module to speak to the relevant expert. 🙂
1. You add P plus S for OCI. The NCI proportion of the rev’n gain is then shown separately (in the split of TCI).
2. Any goodwill and therefore any impairment would relate to the subsidiary. The associate would be recognised using equity accounting.
🙂
Gain on ‘disposal’.
Dr Inv 1.6 Cr P&L or OCI (if irrevocable election) 1.6
Then consolidate.
After IFRS 5 classification, use current asset rules………………………so loss goes to P&L.
EPS is examined in FR much more than SBR.
You only take account of post-year end issues if they are bonus or rights issues.
If company has 10 shares in issue for the whole year, but makes a 1 for 2 bonus issue after the year end , the denominator in the calculation would be 15.
BUT
If company has 10 shares in issue for the whole year, but makes a 1 for 2 issue AT FULL MARKET PRICE after the year end , the denominator in the calculation would be 10.
🙂
