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  • jimbobjimbob Feels At Home Registered Posts: 43
    im panicking about associates now its soooo gonna turn up i just know it. must remember to work out good will and % of profit and leave everything else alone is this right lol
  • Debs2809Debs2809 Feels At Home Registered Posts: 42
    Steve

    Whats the difference again with Associates, my head is scrambled!!

    Debs
  • confused!!confused!! Well-Known Registered Posts: 130
    Hi You dont have to work out the goodwill on the associate.... Just add it in a line on the Balance sheet i think
  • mehmetmehmet Well-Known Registered Posts: 113
    I posted this earlier in the thread, which should (I hope) answer your query:

    SUBSIDIARY

    A subsidiary is an entity that is controlled by another entity (IAS 27)

    Control is defined as being when the parent(an entity with one or more subsidiaries) has:
    -Majority voting shares (more than 51%)
    -Right to exercise influence over subsidiary (usually by having an agreement with other investors)
    -Controls voting rights
    -Parent manages subsidiary
    -Parent has ability to appoint and remove directors (usually by having an agreement with other investors)

    When consolidating accounts with a subsidiary we need to calculate the;
    -goodwill
    -consolidated reserves (group retained earnings)
    -minority interests.

    Then you do a line by line consolidation, adding the subsidiaries figures to the parents to get one total for receivables, PPE, payables, revenue, distribution costs, etc.
    Also, you must eliminate all intra-group transactions (in accordance with the single entity concept), e.g, intra-group sales. Also, any unrealised profits must be deducted from any transferred goods which have yet to be sold.

    ASSOCIATE

    An associate is an entity over which the investor has significant influence. (IAS 28)

    The standard makes a presumption that significant influence exists once the investor has at least 20% of the voting rights. Other circumstances where significant influence arises include when the investor is the sole supplier to the entity.

    If investor has significant influence, it must use the equity method of accounting in the consolidated accounts:
    -In the Profit & Loss account, the investor will put a separate line for it's share of the associate's profits
    -In the balance sheet, there will be one line entered, showing the value of investment in the entity. This can be calculated in one of two ways:
    • parent's share of net assets plus unamortised goodwill, or
    • cost of investment plus any post-acquisition profits

    Also, note that the share of post-acquisition profits, less any goodwill impairment will be added to the parent's reserves.
  • peugeotpeugeot Experienced Mentor Registered Posts: 624
    Mehmet's reply has covered everything here.

    However, as I said earlier sometimes the clue is in the question about whether a company is an associate or a subsidiary of the parent.

    Hayden and Seek (H) - holding (S) - subsidiary.

    Just look out for the names and the chances are that may give you a hint.

    Kind regards
    Steve
  • mehmetmehmet Well-Known Registered Posts: 113
    confused!! wrote: »
    Hi You dont have to work out the goodwill on the associate.... Just add it in a line on the Balance sheet i think

    You need to calculate goodwill if it has been impaired because it will affect the consolidated reserves.

    I'm currently doing a consolidated balance sheet based on the data provided in the June 2005 DFS exam. I'm pretty sure it goes beyond the syllabus as it's based on an associate and a subsidiary, but should help you understand what you'd have to do in the exam. Once I've done it I'll upload it here.
  • jimbobjimbob Feels At Home Registered Posts: 43
    took me 15 mins to do it however is not easy as you need to hunt for the figures but as long as you remember the following headings should be ok
    value of net assets
    goodwill
    consideration
    grooup share of profits
    goodwill impairment
    total investment

    let me know if you agree with that or if i missed summat out
    not my best area
  • Becks2214Becks2214 New Member Registered Posts: 8
    Soce

    Hi All,

    Can anyone help with the Statement of Changes in Equity... i have no idea how to do it and starting to panic now as the exam is tomorrow!!

    Thanks
  • mehmetmehmet Well-Known Registered Posts: 113
    Here are my workings. I typed them up in Excel and have taken print screens of them and uploaded them below.

    If you need me to explain anything, let me know.

    To see them clearly, click on the thumbnail. Then click on the window that pops up. Click on it again, then it will open it in a new window. Then, click on it again and it will zoom in.
  • jimbobjimbob Feels At Home Registered Posts: 43
    thats a fairly complex answer 5 times more info than mine and the answers was the same
  • confused!!confused!! Well-Known Registered Posts: 130
    I so hope it only comes up as a wordy question, I cant get my head around this and only have tonight :-(
  • jimbobjimbob Feels At Home Registered Posts: 43
    lets all pray its a worded one mr confused
    can anyone tell me the difference between equity and capital employed??
  • mehmetmehmet Well-Known Registered Posts: 113
    Equity is the residual interest in the assets of the entity once all it's liabilities have been deducted (IASB Framework).

    This is the bottom line in the (UK version) of the Balance sheet. It normally consists of the Share Capital, Share Premium and any Reserves (usually profits, and sometimes revaluation). It is equal to Net Assets (Assets - Liabilities), as defined by the accounting equation.

    Capital Employed is the value of the assets that contribute to a company's ability to generate revenue.

    It is calculated by adding non-current assets and current assets together, then deducting the current liabilities of the entity.
    The shorter, and more often used, way of calculating it is adding Non-Current Liabilities(Debt) to the Equity of the business. This is best explained by expanding the accounting equation:

    ASSETS - LIABILITIES = EQUITY

    to

    (Non-Current Assets + Current Assets) - (Current Liabilities + Non-Current Liabilities) = Equity

    if we remove the brackets, we get:

    Non-Current Assets + Current Assets - Current Liabilities - Non-Current Liabilities = Equity

    then by rearranging to get Capital employed on either side, we get:

    Non-Current Assets + Current Assets - Current Liabilities = Non-Current Liabilities + Equity
  • MidmacMidmac New Member Registered Posts: 9
    jimbob wrote: »
    remember if its a asset - for increase + for decrease
    if its a liab then - for decrease and + for increase

    I like it, nice and simple. Thanks
  • bigmuggsybigmuggsy Feels At Home Registered Posts: 92
    Re Discussion on Associates/Subsidiaries

    Our tutor said that we should only learn the syllabus based on the previous 2 years. As there hasnt been a question on associates in that period am I right in thinking that its unlikely to come up? I know for a fact if it does then myself and alot of other people will come up stuck. Ah well too late now!!!
  • confused!!confused!! Well-Known Registered Posts: 130
    My tutor kind of hinted about associates, so i think it will come up whether it will be a calculation or just maybe to explain what it means or something... or maybe both!
  • jimbobjimbob Feels At Home Registered Posts: 43
    do tutors know summat we dont???????????
  • sebastianforbessebastianforbes Well-Known Registered Posts: 172
    trust me... your tutor doesn't know what's in the paper.

    speculation doesn't help anybody :001_tt2:
  • jimbobjimbob Feels At Home Registered Posts: 43
    hope your right
    still cant take in all the ias's though
    guess it just a see what twist turn up in the paper
    one of my biggest fears is that the questions will be in accounting standards jargon not plain english
  • sebastianforbessebastianforbes Well-Known Registered Posts: 172
    maybe, but it won't be worth many points !!!
  • jimbobjimbob Feels At Home Registered Posts: 43
    what wont be worth many points
  • sebastianforbessebastianforbes Well-Known Registered Posts: 172
    any random question which is not frequently examined.

    ie. anything on associate companies.
  • jimbobjimbob Feels At Home Registered Posts: 43
    aaaaaaahhhhhh i gettya your possibly right
  • immenseimmense Feels At Home Registered Posts: 97
    jimbob wrote: »
    pec????????????
    am i being thick whats that

    The post below changed it to pev!
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