consolidated account

meibaker

does anyone find consolidated account quite hard? anyone has a easy way to do consolidated account thank you!

AK002

They're ok once you memories the steps.

I find it gets trickier when they bring in Associates also.

Paul24

You need to be clear in your head once you have identified a subsidiary which areas you are going to consolidate and which areas you will take a share of. This is done by using the criteria to determine which parts of the subsidiary balance sheet you own and which parts you control. All assets and liabilities are controlled by the parent and are therefore consolidated, the equity section of the balance sheet represents (when multiplied by % share) what is owned by the parent.

A heavy proportion of marks are available for setting up and following the consolidation steps, i.e showing all consolidation additions on the face of the statements and moving any other figures to workings, be it for Intergroup sales, Retained earnings, or MI.

The key is practising and ticking off EVERY line as you work down the balance sheet. I forget whether AAT examines sub-subsidiaries and effective interest , but once you have a solid grounding in consolidation you will pick up a lot of marks by following these simple steps.

Paul

meibaker

thank you very much for your advice!

Steve Collings

Paul24 wrote: »

I forget whether AAT examines sub-subsidiaries and effective interest
Paul

No sub-subsidiaries and effective interest feature in the higher level chartered papers, but for clarity I'll illustrate it for those moving up after AAT:

Suppose H owns 80% of S who owns 60% of SS. Because S is a subsidiary of H, the chain of control makes SS a sub-subsidiary of H, and H will own (80% x 60%) = 48% of SS. Non-controlling interests in S will own (20% x 60%) 12% of SS and the NCI in SS itself will own the remaining 40%.

Regards
Steve

beverly hudson

Consolidations can only be done well by doing lots of practice. Also remember the new rule with goodwill. It can only be recognised using gross values! A lot of students are not interpreting the new requirements.

Steve Collings

Hello Beverly

Recent sittings of DFS have seen the AAT require the students to continue to calculate goodwill using the proportionate method rather than use the gross method. The ‘old’ way of calculating goodwill is still an option under the revised IFRS 3, hence why AAT specifically refers to calculating the goodwill under the proportionate method so by saying it can only be recognised using the gross method is incorrect.


To recognise goodwill using the gross method, students would need to know the fair value of the NCI's share of the goodwill which hasn't appeared in DFS.

Regards
Steve

Steve Collings

Just for clarity, for those of you who haven't come across the 'gross' method of goodwill. IFRS 3 (revised) allows an entity to bring in the non-controlling interest's share of goodwill onto their SoFP by debiting goodwill in non-current assets and crediting non-controlling interests in equity.

Old method:

Cost of acquisition...100
Net assets acquired.(80)
Goodwill..................20

New method:

Under this method you have to know the NCI's share of goodwill at fair value so if we assume this is $10 then goodwill above would be $30 with the additional $10 being recognised in NCI in equity.

Regards
Steve

beverly hudson

beverly hudson wrote: »

Consolidations can only be done well by doing lots of practice. Also remember the new rule with goodwill. It can only be recognised using gross values! A lot of students are not interpreting the new requirements.

Steve it seems you are correct having checked the requirements. When did this amendment come in as I was under the impression goodwill can only be recognised at full value.

Steve Collings

Hi,

It has been a requirement of IFRS 3 (revised) since the issuance of the standard in January 2008 and the revised standard (in practice) kicks in from (I think) accounting periods starting 1 July 2009 but most examining bodies started examining the revised standard from December 2008. I think the IASB's Exposure Draft containing the proposed revisions to IFRS 3 had a requirement to measure goodwill using the gross method only (I seem to remember writing about that in an article) but the finalised standard contains an option to measure goodwill using either the gross or proportionate method. To use the gross method the fair value of the goodwill attributable to the NCI must be known to DR goodwill and CR NCI.

Regards
Steve

Clare Finch

IFRS 3 (revised)

I just wanted to confirm that as ever Steve is absolutely correct. The revision of IFRS 3 has never required goodwill to be calculated in full, it was introduced as an option with proportionate goodwill still being perfectly acceptable.

If you look at the new sample assessment for the new FS paper the consolidation is done on the 'proportionate basis'.

Regards

Clare (Finch)

Barry

I got a bit confused with Beverley Hudson answer. I have never heard of the gross way of doing goodwill. At least we have Steve and Claire's confirmation who seem to be the ones in the know. I think they're the ones to listen to. Claire I have ordered your book from Amazon as well as I have heard lots of good things about it and if Steve recommends it over his book then it must be good.

Baz

Steve Collings

Barry wrote: »

Claire I have ordered your book from Amazon as well as I have heard lots of good things about it and if Steve recommends it over his book then it must be good.

Baz

Yes - in my opinion this book is a pre-requisite for any corporate reporting paper which examines IFRS/IAS (as most of them do now).

Kind regards
Steve

Clare Finch

Re the original post for an easy method..there are many different ways..in my 18 years as a tutor I have worked for providers/publishers who have used most of them.

My view is the 5 core working approach used by my book and also Kaplan (where I manage the content) is by far the simplest..

It is all down to opinion though..

Get a method, use it consistently..

Hope that helps

Clare (Kaplan)

A-Vic

i liked the TASM method if i find my notes tonight i will post but all it is basically is four colums with the above letters in each

Clare Finch

That looks good.

Just be aware that IFRS 3 (Revised) changed the term Minority Interest to Non-controlling interest. You may need to re name it TASN !! Lol

Regards

Clare

A-Vic

o lord yeah (sits and waits for blast from steve)

Clare Finch

The key is practising and ticking off EVERY line as you work down

This advice from Paul is also fantastic..use a short ruler and a ticking pencil and tick through the question...really really makes a big difference....

Steve Collings

Consolidation Steps

I have uploaded an edited version of the consolidation steps in my revision notes I wrote for my revision day for the June sitting. I have had to edit it quite a lot due to the file size restrictions on here, but it should go towards helping.

Again, Clare's IFRS book illustrates this step perfectly in the 'blue' standards.

Regards

Steve

meibaker

steve collings wrote: »

i have uploaded an edited version of the consolidation steps in my revision notes i wrote for my revision day for the june sitting. I have had to edit it quite a lot due to the file size restrictions on here, but it should go towards helping.

Again, clare's ifrs book illustrates this step perfectly in the 'blue' standards.

Regards

steve

thanks steve!!

Andypandy

It might seem a little confusing at first, but if you enjoyed FRA then you should like this once you've got your head around it. It's one of those things that all comes together in the end (with a bit of 'plain English' help from Steve).