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Sir I have noticed in one question that there has been no adjustment for interest on intra group(Pyramid 06/2012) and in another there was(Pandar 12/2009).
I’m just confused why is that? Although the adjustment will not affect totals but surely does affect group retained earnings.The cancellation of intra-group interest is a cosmetic adjustment for the statement of profit or loss.
When adding expenses and incomes across for the purposes of consolidating statements of profit or loss, it is “silly” to be showing as an expense some loan interest that will also be shown as an income
So we cancel – but only for the purposes of presenting the statement of profit or loss, NOT for the purposes of arriving at Consolidated Retained Earnings for the statement of financial position
Yr ended 30 nov 2007
Retained profit of susan(subsidiary)=69000Susan earned a profit of 9000 in the year ended 30 Nov 2007.The loan note in Susan book represent monied borrowed from his parent company karl during the year. All of the loan note interest has been accounted for.
In this case it doesnt say when it has given the loan in particular and says it has accounted for loan note interest. So should i assume that the profit figure has already incorporated those issue. Should i adjust the profit of post acquisition period or just time apportion 9000 to calculate retained profit for the date of acqusition?
Much confused whenever there is a loan note part along with profit given and have to find out retained earning at acquisition date.
Retained for the year means the net profit for the year. Is not it?Time apportion the 9,000 (if appropriate) after adding back the post-acquisition loan note interest
Then deduct the loan note interest from the post acquisition profits
Yes, “retained for the year” DOES mean the net profit for the year
Hello Sir,
Hope you are doing well.
I am sorry for commenting on this old post but i have one question regarding this topic if you could help me with it i would really appreciate your help.Sir, the problem in kaplan book is that they didnt do the method like the way you have explained it by adding the interest loan in profit for the year and apportion it .then deducting the same interest from post acq profits
I am so confused now. i did the same method the way you explained to us but the answer they gave is without taking into account for loan interest.they have simply pro -rate the profit for the year.
here is the question and answer related to mid year acquisition and loan borrowed from Parent compan:-
Parent comany Karl has acquired the susan subsidiary on 1st May 2007 and year end is 30 November 2007
Noncurrent liabilities 8% Loan notes for subsidiary is 20,000 which represents monies borrowed from Karl on 30 November 20X7.
Susan earned a profit of $9,000 in the year ended 30 November 20X7.
Retained earnings for Subsidiary is 69,000 at 30 November 2007their answer is
RE @ acq’n (balance) 63,750
Post acq profit (7/12 × 9,000) 5,250
RE @ reporting date 69,000and they have allocated 5250 to NCI and Group retained earning.
Last thing they also have the impairment in the question for goodwill at the year end.
I want to now that do we have to pro rate the impairment too or not ?Thanking you in advance.
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