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Advanced Financial Accounting

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Advance Financial Accounting (FIN-611)
VU
LESSON # 37
Example - [ Case iii ] Pre-acquisition Reserves,
Goodwill
Balance Sheet as on 31st December 2008
P
S
Rs
Rs
400
Fixed Assets
1,000
Investment in S.
500
Current Assets
400
200
1,900
600
Share Capital
1,200
300
Reserves
550
150
Current Liabilities
150
150
1,900
600
The Parent Co. (P) acquired 100% shares of the Subsidiary Co. (S) on 1st January
2008 when the reserves of the company were worth Rs100.
Required:
Prepare the Consolidated Balance Sheet as on 31/12/2008. (Ignore
impairment of Goodwill).
Solution - [ Case iii ]
Analysis of Equity of Subsidiary Company
Pre-
Post-
acquisition
acquisition
Rs
Rs
Share Capital of subsidiary company
300
Reserves of subsidiary company
100
50
400
Calculation
of Goodwill
Cost of Investment
500
Pre acquisition owners' equity of the subsidiary company
(400)
Goodwill
100
Calculation
of Group
Reserves
All reserves of parent company
550
196
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Advance Financial Accounting (FIN-611)
VU
Post acquisition of the subsidiary
company
50
600
Consolidated Balance Sheet
As at 31 December 2008
Rs
Fixed Assets
1,400
Goodwill
100
Current Assets
600
2,100
Share Capital
1,200
Reserves
600
Current Liabilities
300
2,100
Example - [ Case iv ] Goodwill Impairment, Pre-acquisition
Reserves
Balance Sheet as on 31st December 2008
P
S
Rs
Rs
Fixed Assets
1,000
400
Investment in S.
500
Current Assets
400
200
1,900
600
Share Capital
1,200
300
Reserves
550
150
Current Liabilities
150
150
1,900
600
The Parent Co. (P) acquired 100% shares of the Subsidiary Co. (S) on 1st January
2008 when the reserves of the company were worth Rs100. Goodwill, has been
impaired by Rs. 20
Prepare the Consolidated Balance Sheet as at
31/12/2008.
Required:
Solution - [ Case iv ]
Analysis of Equity of Subsidiary Company
Pre-
Post-
acquisition
acquisition
Rs
Rs
197
img
Advance Financial Accounting (FIN-611)
VU
Share Capital of subsidiary company
300
Reserves of subsidiary company
100
50
400
Calculation
of Goodwill
Cost of Investment
500
Pre acquisition owners' equity of the subsidiary company
(400)
100
(20)
80
Goodwill
Calculation
of Group
Reserves
All reserves of parent company
550
Post acquisition of the subsidiary
company
50
(20)
Impairment loss of good
580
Consolidated Balance Sheet
As at 31 December 2008
Rs
Fixed Assets
1,400
Goodwill
80
Current Assets
600
2,080
Share Capital
1,200
Reserves
580
Current Liabilities
300
2,080
Example - [ Case v ] Impairment of Goodwill, Inter Co. Dividends & Loans
Balance Sheet as on 31st December 2008
P
S
Rs
Rs
Fixed Assets
1,000
600
Investment in S
500
Dividend Receivable
100
Other Current Assets
300
Current Assets
400
200
Loan to S
200
800
2,100
Share Capital
1,200
300
198
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Advance Financial Accounting (FIN-611)
VU
Reserves
700
150
Loan from P
200
Dividend Payable
100
Other Current Liabilities
50
Current Liabilities
200
150
2,100
800
The Parent Co. (P) acquired 100% shares of the Subsidiary Co. (S) on 1st January
2007 when the reserves of the company were worth Rs70. Goodwill has been
impaired by Rs. 52
Prepare the Consolidated Balance Sheet as at
31/12/2008.
Required:
Solution - [ Case v ]
Analysis of Equity
Pre
Post
Rs
Rs
S
Share Capital
300
Reserves
70
80
370
P
Investment
500
Reserves
700
Goodwill
130
Impairment of Goodwill
(52)
(52)
78
Group Goodwill
Group Reserves
728
P
S
Rs
Rs
Fixed Assets
1,000
600
Investment in S
500
Dividend Receivable
100
Other Current Assets
300
Current Assets
400
200
Loan to S
200
2,100
800
Share Capital
1,200
300
Reserves
700
150
Loan from P
200
Dividend Payable
100
Other Current Liabilities
50
199
img
Advance Financial Accounting (FIN-611)
VU
Current Liabilities
200
150
2,100
800
Consolidated Balance Sheet
As at 31 December 2008
Rs
Fixed Assets
1,600
Goodwill
78
Current Assets
500
2,178
Share Capital
1,200
Reserves
728
Current Liabilities
250
2,178
200
Table of Contents:
  1. ACCOUNTING FOR INCOMPLETE RECORDS
  2. PRACTICING ACCOUNTING FOR INCOMPLETE RECORDS
  3. CONVERSION OF SINGLE ENTRY IN DOUBLE ENTRY ACCOUNTING SYSTEM
  4. SINGLE ENTRY CALCULATION OF MISSING INFORMATION
  5. SINGLE ENTRY CALCULATION OF MARKUP AND MARGIN
  6. ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
  7. NON-PROFIT ORGANIZATIONS
  8. PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS
  9. DEPARTMENTAL ACCOUNTS 1
  10. DEPARTMENTAL ACCOUNTS 2
  11. BRANCH ACCOUNTING SYSTEMS
  12. BRANCH ACCOUNTING
  13. BRANCH ACCOUNTING - STOCK AND DEBTOR SYSTEM
  14. STOCK AND DEBTORS SYSTEM
  15. INDEPENDENT BRANCH
  16. BRANCH ACCOUNTING 1
  17. BRANCH ACCOUNTING 2
  18. ESSENTIALS OF PARTNERSHIP
  19. Partnership Accounts Changes in partnership firm
  20. COMPANY ACCOUNTS 1
  21. COMPANY ACCOUNTS 2
  22. Problems Solving
  23. COMPANY ACCOUNTS
  24. RETURNS ON FINANCIAL SOURCES
  25. IASBíS FRAMEWORK
  26. ELEMENTS OF FINANCIAL STATEMENTS
  27. EVENTS AFTER THE BALANCE SHEET DATE
  28. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
  29. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 1
  30. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 2
  31. BORROWING COST
  32. EXCESS OF THE CARRYING AMOUNT OF THE QUALIFYING ASSET OVER RECOVERABLE AMOUNT
  33. EARNINGS PER SHARE
  34. Earnings per Share
  35. DILUTED EARNINGS PER SHARE
  36. GROUP ACCOUNTS
  37. Pre-acquisition Reserves
  38. GROUP ACCOUNTS: Minority Interest
  39. GROUP ACCOUNTS: Inter Company Trading (P to S)
  40. GROUP ACCOUNTS: Fair Value Adjustments
  41. GROUP ACCOUNTS: Pre-acquistion Profits, Dividends
  42. GROUP ACCOUNTS: Profit & Loss
  43. GROUP ACCOUNTS: Minority Interest, Inter Co.
  44. GROUP ACCOUNTS: Inter Co. Trading (when there is unrealized profit)
  45. Comprehensive Workings in Group Accounts Consolidated Balance Sheet