IFRS LIST.COM - The online community about IAS IFRS, Accounting and Auditing » CONSOLIDATION

Consolidation

Jon C. — Fri, 02 Apr 2010 12:36:50 +0000

1. Does IFRS require consolidated accounts to be reported for subsidiary companies pursuing dissimilar activities?

2. Do companies within the EU have to use IFRS as a standard? Are other standards allowed?

3. It is common practice, according to a publication, that consolidated accounts are prepared from the point of view of the parent company, thus, separating the fair values of minority interests. Is this practice being worked upon by IASB?

If possible, please quote the relevant standard and the location of the source copy.

Consolidated accounts Does IAS require consolidated accounts reported for subsidiary companies pursuing...
Financial Statement Consolidation If the subsidiary was established prior to the parent company,...
Borrowing costs capitalization and consolidation?! Could you please help with the following situation. Mother company...

Related posts brought to you by Yet Another Related Posts Plugin.

Consolidation adjustments

srm1930 — Wed, 30 Sep 2009 12:12:43 +0000

Dear Members

Please advice, how to give effect of consolidation adjustments of the previous year into the current year. how do i give effect of goodwill and minority interest which was passed in the previous year in the current year.

your early response will be helpful.

best regards

Suraj Ratan Mohta

srm1930@gmail.com

cell No.9820297934

Assessing for Impairment Indicators on Transition Date Question for anyone that has dealt with this issue: As...
Financial Statement Consolidation If the subsidiary was established prior to the parent company,...
Consolidation After Merge If company (A) has a subsidiary(b) during acquisition no goodwill was...

Related posts brought to you by Yet Another Related Posts Plugin.

Consolidation – IFRS

chirag_d — Fri, 15 May 2009 12:26:03 +0000

Dear All,

Please let me know the treatment of Existing negative goodwill incase of first time adoption of IFRS

Regards

Chirag

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Entries – Consolidation of financial statements

admin — Sat, 11 Apr 2009 08:57:54 +0000

Dear All,

Request your valuable advice on the entries to be passed in the books of 1. Consolidated company 2. Stand Alone Parent Company for the purchase of shares on March 1,2009 and also the treatment of Goodwill.

Company X had already acquired 50 % of shares of Company Y 2 years back for a cash consideration of $65,000(Total Value of Common Stock/shares #1000).The parent company has been recording the investment under equity method and as on Feb 28,2009, the carrying value of investment is $69,000 (after considering the post acquisition share of profits).

On March 1,2009, the parent company has purchased the balance 50% shares for a consideration of $1 , the networth of the company Y being negative ($269K) as on Feb 28,2009.

Please advice what entries needs to be passed under 1. IFRS 2. USGAAP.

Please quote relavant accounting standards, wherever necessary.

Thanks

Regards

Ganesh

Consolidation adjustments Dear Members Please advice, how to give effect of consolidation...
Example of Financial Statement (Model IFRS financial statements for 2009) Dear all this is just to inform you about an...
Consolidation 1. Does IFRS require consolidated accounts to be reported for...

Related posts brought to you by Yet Another Related Posts Plugin.

Business Combinations, Consolidation (IFRS 3 and IAS 27) literature

spcboarder — Thu, 19 Mar 2009 22:01:12 +0000

Hello,

I am an Austrian student and I would like to write about consolidation. More specifically I am going to write a comparison between full consolidated corporations and consolidation at equity. As far as I know, equity consolidation exists as term in german, but not in English. In English it is referred to as elimination of balances according to IAS 27 debt consolidation. IFRS 3 – Business Combinations is going to be relevant for me as well.

I am in the need of some good literature to read up on the topic. I would like to write my master’s thesis in English and therefore it is quite difficult to find english according literature in university libraries.

However, if you could recommend me a good book on the topic, I am going to buy it. I just want to avoid buying a book which is not connected to my topic at all.

So far I am reading german literature and “A Global Guide to Accounting for Business Combinations and Noncontrolling Interests Application of the U.S. GAAP and IFRS Standards” by PriceWaterhouseCoopers.

Thanks,

Willi

Consolidation adjustments Dear Members Please advice, how to give effect of consolidation...

Related posts brought to you by Yet Another Related Posts Plugin.

In case of newly established Subsidiary

ca.lokeshjain — Wed, 04 Feb 2009 08:32:49 +0000

In case of newly established subsidiary, which have not stared his commercial activities and in construction phase, is it require to consolidate it or we can show it on cost. Plz tell me What will be the right treatement

Sale of subsidiary Company ABC and Company DEF both own Company XYZ (50%0 each). Company...

Related posts brought to you by Yet Another Related Posts Plugin.

PPP

ifrslist — Sun, 14 Dec 2008 22:29:00 +0000

Please give me your opinion on forex loss on Assets. Do you capitalize it or do expense it to the foreign loss

This e-mail message and any attachment hereto are confidential information intended for a specific addressee and purpose. If you are not the intended recipient, or a person responsible for delivering it to the intended recipient, you may not disclose, copy, distribute or take any action based on the contents hereof, or retaining this message or any part of it, in any form whatsoever. Any such conduct is prohibited and may be unlawful. If you have received this e-mail in error, please notify the sender immediately by replying to this message and destroy all copies hereof. No opinion expressed by the sender necessarily constitutes the opinion of Mobile Telecommunications Ltd (MTC). This message does not constitute a guarantee or proof of the facts mentioned herein. No employee or intermediary is authorized to conclude a binding agreement on behalf of MTC by e-mail without the express written confirmation by a duly authorized representative of MTC. All reasonable precautions have been taken to ensure a virus free message however, MTC cannot guarantee this nor accept responsibility whatsoever for loss or damage arising from the use of this e-mail or attachments. MTC reserve the right to monitor all e-mail communications transmitted through our network.

dear strauss,,

in the normal course of business, an account namely “profit/loss on currency exchange rate” is opened under the caption of “share capital & reserves”.

for more understanding, plz mention the company business.

Regards,

amamd

dear strauss,

it will be precessed through income statement, it will not be capitalized. . . today, most of softwares provide previlege of mutilple currency. . .

for your understanding, you should present it through profit & loss statement under the head “gain/loss on currency exchange”.

Regards,

ammad

Danella,
there are two different issues around foreign currency:
1) Translation adjustements on consolidation while translating the balance sheet from the operating to the functional currency. These differences are accounted for under translation adjustments directly through equity as these are basically unrealized gains/losses.
2) Foreign exchange gains or losses on transactions. When recognizing assets, all costs directly attributable to that asset should be capitalized. That would include foreign currency losses. The same method applies for fixed as well as financial assets.

I hope that helps,

Jeroen

As per A S 11. we cannot capitalise the forex loss on fixed asset but we have certain criteria to capitalise.

dear Danella,

plz explain the situation in detail you are encountering.

thanx & regards,

ammad

Any expenditure directly linked to the formation of assets is reflected in the cost of asset……

when added to cost of asset they become eligible for depriciation.any foriegn exchange on a capital transaction is a capital loss and hence by any stretch of imagination cannot be charged to Revenue….leave alone any standard.

Regards

R.Veeraraghavan

We bought equipment- Specifically to upgrade our CORE from a foreign supplier before our Financial Year-end. The equipment arrived at our warehouse before year-end, because of some reason we could not arrive the equipment on our system. But the transaction were recognize at the rate as at year-end. We didn’t hedge the transaction.

The payment were due in October which is after year-end. The South African Rand were much weaker against the USD, which means our forex loss in the new year is extremely high. The liability relating to this assets is much higher than at year-end.

Hope this explain a bit more

Danella

Dear,

such currency difference will be incorporatred as increase in the value of asset and will capitalized over the life of asset.

Regards,

ammad

Which means the asset became more expensive and it should be capitalized for the higher amount (intial cost + forex costs)

Dear Danella

The assets should be capitalized when it is received and put to use.
The foreign currency will be transalated based on the bill of lading
date. Assets should be debited and liability should be credited. Later
on while making the payment whatever loss or profit on transaltion
arises should be expensed/ income and not to be capitalized. The
payment has nothing to do with assets capitalization.

Thanks

Hemant

Danella,

I double checked after the comment below, and I agree with Hemant. IAS 21.28 explicitly states that gains/losses on forex should be recognized in P&L. The forex is not attributable to the asset but to the financial liability.

My apologies for my earlier answer.

Regards,

Jeroen

As far as AS-11 and Companies Act 1956 is concerned there is contradictry between these two. AS-11 suggest for charging it in P&L where Act permits to adjust it with value of Assets. But section 211 of Act says that books of accounts must be kept as per accounting standards. So, in my opinion it should be charged against profit.

–
With regards,
Sharvan

Conversion of foreign currency expenses with local currency Dear I am in a financial organization. Our company pays...

Related posts brought to you by Yet Another Related Posts Plugin.

Acquisition accounting

ifrslist — Sun, 14 Dec 2008 22:28:00 +0000

Dear all,

I have a question in relation to acquisition accounting in accordance with
IFRS3. In this case a parent company A acquires all the shares in
subsidiary company B for (say) 50M. This cost price represents a goodwill
over the fair value of the assets and libailities assumed of 15M. Where
should I record the 15M goodwill? Is this in the subsidiary company B or
in parent company A?

Based on IAS21, p. 47, I would say in the sub.
All the best, Farah

L’adresse e-mail de votre correspondant a changé. Elle devient: prenom.nom@gdfsuez.com
Nous vous remercions de bien vouloir procéder à la mise à jour de votre répertoire.

Your correspondent’s e-mail address has changed. It is now: firstname.familyname@gdfsuez.com
Thank you for updating your address book accordingly.

Het e-mailadres van uw correspondent is gewijzigd. Het wordt: voornaam.naam@gdfsuez.com
Gelieve uw adressenbestand aan te passen.

GDF SUEZ Mail Disclaimer: http://www.gdfsuez.com/disclaimer/disclaimer-fr.html

As per IFRS 3 Goodwill acquired on consolidation is supposed to be shown
in the Consolidated account of the parent company in this case A.

Benaya

It is recognised in neither the Parent company nor the sub( Seperate Financial Statements). Goodwill is only ever recognised seperately in the consolidated financial statements.The calculation of goodwill based on Cost price over the net assets fairly valued is perfectly correct. However please note with the new IFRS3 & IAS27, the amount of goodwill can also be calculated based on the “full goodwill” method.
Shivan

There are two legal entities: P Parent S Subsidiary
Remener records are kept in Parent company to take account of its investment in S;
In the books of the parent company P under Non current Assets it will record Inventment in S as $50M
Consolidation is done to show the financial position of the group; as though it was one entity.

At this point goodwill $15m shall be recognised as purchased goodwill in the consolidated accounts. Neither P nor S will show records of goodwill.
The goodwill can be armotised over a period as prescribed by the directors and managemet or it can be written off to consolidated retained earnings.
Remember $50m is the cost of investment in S. It must be used to arrive at the goodwill figure of $15M as a consolidation item. The underlying figure of $35m
represents net assets of the Subsidiary S at the date of acquisition.

Dear All,

Shivan is perfectly correct according to the mail below. Goodwill in this situation can not be recorded in any of the entity’s book (parent and subsidiary) but rather on the consolidated statement of financial position. Please also refer to the new IFRS3 to get update on the full goodwill approach.

William

Hi Henry,

I agree with you on all the other information provided in your mail but not when you said goodwill should be amortized as determined by the directors. According to IFRS standards, goodwill should not be amortized but rather reviewed for impairment annually.

it should be shown in the parents group accounts as a nca ant annually tested for impairment not amortised

Hi Martijn,

As per IFRS3 itself, I suggest you use the ACCA search engine and type IFRS3, you’ll have all the explanation you want or go to the link below

http://www.accaglobal.com/members/publications/accounting_business/cpd/IFRS3

Cheers

Hi martijn,
The structure is such that, consolidation is consolidation of 2 balance sheets to find the consolidated assets and liabilities and networth.

In the standalone balance sheet of Holding:
Investment is shown as cost in the asset side of the Balance Sheet. Unless there is a change in carrying amount.
To keep it simple, lets say that carrying cost IS cost of acquisition, that is, the consideration paid, in your situation GBP 100.

In the subsidiary’s standalone BALANCE SHEET, nothing (NOTHING MOVES).
SHARE ARE ACQUIRED FROM SHAREHOLDER not SUBSIDIARY. Maybe from the markets or by approaching the shareholders.

Consolidated statement line by line addition shows goodwill.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Consolidation , Foreign exchanges ( rates)

ifrslist — Sun, 14 Dec 2008 22:26:00 +0000

Dear All , Kindly need your urgent help

We Have more than 10 companies in different countries and using different currencies :

1- our holding company send us every month end the conversion rate that we should use for each currency in order to be able to consolidate in 1 reporting currency.

2- Every month we report the PL ( Year to Date figures ) , and the balance with other schedules …

MY Question is : We should use the average rate of the PL and month end rate for Balance sheet ???? or we should use same rate for both????

2- Since we are reporting the PL as Year to Date figures , do we have to re-evaluate YTD figures this month on this month rate or only the month and we keep the previous month as the previous re-evaluation ????????

to be more clear my question : for the profit and loss : when we report PL January we evaluate and report , so when we report February as YTD do we re-evaluate YTD ( JAN + FRB ) as FEB Month end rate or we keep jan as jan rate already re-evaluated and we evaluate feb as feb rates?????

remember i’m asking on consolidation level

Thanks and regards

tony

Tony,

You have to use a month end rate for your Balance sheet and an average rate for you P&L.

If you are reporting the year-to-date figures, you have to revaluate your P&l with the average rate (In January: January, in February: average Jan+feb, in march: average of Jan+Feb+march)

For the balance sheet, you have to use the month end rate communicated by your holding. The balance sheet conversion amount you obtain is the sum of different components. Please find attached a spreadsheet with an example, showing the calculation of the revaluations.

I hope it will be helpful.

Best regards,

Eric

answere

1.you should use the average rate for the profit and loss account and month end rate for the balance sheet

2. you have to re-evaluate the YTD for pl.

I would confirmed these answers.

Sincerely your,

Stéphane Bellanger – France

Guys thanks for your help

Only i have 1 confusion : when we say Re-evalute YTD ,PL ( so average rate should be used for which period , average rate of the YTD period ?) or average rate of the month when i am reporting

example : we are in September 2008 – reporting YTD- PL- September ( should i use average rate of Sep??? , or average rate of JAN to DEC) ?

regards

Hi

The average rate covering the reporting period (if the PL is for 3 months means the avergae rate for that three months).

For the purpose of consolidation my view is that:

1. P & L Account; we should revaluate at the rate existing on the closing date, and

2. BS: similarly for BS too end period rate should be utilized

It would bring uniformity in conversion as regards both the financial statements as to depict profitability for the period ending on a particular date as well as state of affairs on that date.

Rgds.

Dear all

You must use a monthly weighted average rate.

Using this rate, which is weighted according to sales, gross margin, … your cumulated sales, costs and/ or gross margin will be less impacted by the difference.

Kind regards

Michel

Conversion of cross currency transactions is basically to represent in real and absolute terms of the currency in which you are converting rather than for weighing which will give a better impact on your profitabilities.

So, the reply given by Mr. Ashutosh two threads below is correct.

Good Luck

Conversion of foreign currency expenses with local currency Dear I am in a financial organization. Our company pays...

Related posts brought to you by Yet Another Related Posts Plugin.

Impairment Goodwill

ifrslist — Sun, 14 Dec 2008 22:19:00 +0000

Por favor podría alguien indicarme en donde puedo encontrar
información sobre metodologías para la medición del deterioro del
Goodwill. Sería Adecuado usar multiplos como base para su medición.

Please could someone tell me where can I find information on
methodologies for the measurement of impairment of Goodwill. Could i
use the methodology of multiples as a basis of measurement

Sincerely

Wilmar

You can send me a private note in Spanish if you like

That said as the Group is an English speaking one here is my view
(others might disagree)

1. Under IFRS the impairment testing is two fold

a) Th consolidation unit (HeadQuarters) do the impairment testing on a
world-wide basis but

b) The cash generation unit (subsidiary) is also supposed to do its
own profit & loss projections as kind of an early warning system

2. Under US GAAP only 1 is followed which gives a lot of surprises at
year-end. If I was wrong, many CFOs have realised that US GAAP is much
more vague than IFRS and are now using technical valuation firms (not
external audit firms) to assess the impairment of goodwill on a
world-wide basis. The ironic story is that in 7 years running I have
seen under US GAAP big impairments in the US not only because of
investments in Europe & Asia but majorly because divisions of the
business in the US were loss makers. Therefore if 1.b) above would be
in place the US companies would be less exposed

To get to the bottom of this on the topic go to pwcglobal.com and type
differences between US GAAP and IFRS, download the PDF document and
you will be able to read the relevant sections in relation to goodwill

Hi,

Can anyone let me know, whether it is necessary to allocated the
goodwill to cash generating units, arising in the year of business
combination and further test for impairment in the same year.

Logically, i would say the since purchase price allocation is carried
out, the residual number would represent goodwill for the year of
purchase and it should be evaluated for impairment in the following
period.

Request the thoughts of the group on this..

Ankur

Ankur,

Please review IAS 36, paragraphs 80 – 99 – they should address your question.

Regards,

Millard

Assessing for Impairment Indicators on Transition Date Question for anyone that has dealt with this issue: As...

Related posts brought to you by Yet Another Related Posts Plugin.

Waiver of Inter company Loan

ifrslist — Thu, 28 Aug 2008 15:23:00 +0000

Please let me know the treatment of Inter company loan waiver.Example

Company A is fellow subsidiary of company B.

And company B has given loan to company A for $ 10,000 and there is accrued interest of $ 1000 on loan.

Now Company B waive off all loans and interest.

Under IFRS it should be charged to P& L or equity?

Regards,

Hello,

It should be charged to to P&L, as revenue. Essentially, the company received some cash for free; that’s revenue.

Regards,

While preparing the stand alone books of Company A and B, it should be charged to P&L account.

but at the time of consolidation, both the entry will be knocked off and no impact on the consolidated financials.

best regards

Deferrement of arrangement fee for obtaining loan Can the arrangement fee (agengy fees, structuring fee and legal...
Interest Free Loan to an Employee Dear All, Would you please help me with IFRS accounting...
Loss identification period, loan loss provision Hello, Can anyone tell me how the “loss identification period”...

Related posts brought to you by Yet Another Related Posts Plugin.

Consolidation

ifrslist — Thu, 28 Aug 2008 15:21:00 +0000

Company A holds total control over the board of directors of company B. But it does not have any voting rights in the company B.

Is company A required to consolidate the results of company B with its own results.
If yes, what is the share of results to be included for line by line consolidation.

–
Regards,

As per IFRS 27, Parent Company should have more than half of the voting rights of the subisdairy company for consolidation.

Following should be taken into consideration for substantive operating companies:

Own more than 50 percent of the voting power of an entity
Have power to control greater than 50 percent of the voting rights via agreement with other investors
Have the power to govern finacial and operating policies of the entity under a statute or an agreement
Have power to cast the majority of the votes at the meetings of the BOD or equivalent governing body and control of the entity is by that board or body.
Have power to appoint or remove the majority of BOD or equivalent governing body and control of the entity is by that board or body.

If yes to any one of them above then should consolidate,

Sent via BlackBerry from T-Mobile

Consolidation adjustments Dear Members Please advice, how to give effect of consolidation...
IAS -16 construction of hotel building on leased land Company A Parent company Own land and lease out to a...

Related posts brought to you by Yet Another Related Posts Plugin.

Difference of exchange

ifrslist — Thu, 28 Aug 2008 15:20:00 +0000

Dear All ,
Now we are part of an International Company : so we have to report monthly figures of our 35 units , our 35 units are in different country so different currency ,

We are Consolidating all the units in The Holding and we report one figure to the Worldwide company , every month they send us the rate that we should use.

MY QUESTION IS : AS PER MY KNOWLEDE FIXED ASSETS SHOULD HAVE A HISTORICAL RATE AND WE SHOULD NOT DO A MONTHLY EVALUATION FOR THAT , BUT THEY ARE ASKING US TO DO SO .

CAN ANY ONE ADVISE HOW WE DEAL WITH FIXED ASSETS IF THERE IS MONTHLY EVALUATION????

Hi Tony

Historical cost is used when we have acquired fixed asset in foreign currency (21.23(b)). But while consolidating and presenting financial statements in presentation currency, closing rate should be used. (21.39(a)).

I hope this will help.

Dear Tony,

I agreed with your aproach – fixed assets should be kept at hystorical cost and that’s it all about.

No revaluations are necesary in foreign currency.

Best regards,

Dear Tony

For Consolidation purpose, IAS21 uses closing rate method. Then you should used closing rate for all assets and liabilities to translation.

Fixed assets used historical rate when you used for foreign currency transactions.

Don’t be confused about foreign currency transactions VS Foreign currency translation.

Consolidation process used Foreign currency translation from functional currency into a different presentation currency.

Best Regards;

Wichet

PS. Please see Vikas’ opinion, I strongly agreed with him.

Exchange difference on payment to contractor for development on fixed assets we have a contract for development of a fixed assets,...
Conversion of foreign currency expenses with local currency Dear I am in a financial organization. Our company pays...

Related posts brought to you by Yet Another Related Posts Plugin.

Can someone help me in consolidations notes ?

ifrslist — Thu, 28 Aug 2008 15:19:00 +0000

Hi dear all

Can someone help me in finding best consolidation notes in the context of IFRS-27, and the material should be the best in its use and at least 30 pages.

Waiting for response

Hi Ahsan,

You can get full set of IFRS Illustrative financial statement of Big fours via Google search.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Intercompany

ifrslist — Thu, 28 Aug 2008 15:10:00 +0000

Kindly if an entity is reporting to group of companies as subsidiary because the holding company own 49% of this company only so on the consolidation level we are consolidating the equity only , my question for the trade transactions between this entity and other group entities will be classified as Inter-company transaction or as trade creditors ( like any external supplier) ???
regards

tony

As per IAS, under consolidation, inter company transactions and inter company profits are to be eliminated.

Best Regards

Hi all,

Yes, as normal inter-company only and eliminating transactions are at the holding level.

ThanksDear Hemant ,

I know that interco will be eliminated as per IFRS but my question is : since its associate because we own 49% and we are consolidating the profit only so will be considered as interco or others?

Tony

Yes, as inter company only and not as other creditors, because in the consolidated financial statement of the holding company inter company balances will be knocked off which can not be possible in creditors.

Best Regards

Dear,

See extract IAS28, p22:

Profits and losses resulting from ‘upstream’ and ‘downstream’ transactions between an investor (including its consolidated subsidiaries) and an associate are recognised in the investor’s financial statements only to the extent of unrelated investors’ interests in the associate. ‘Upstream’ transactions are, for example, sales of assets from an associate to the investor. ‘Downstream’ transactions are, for example, sales of assets from the investor to an associate. The investor’s share in the associate’s profits and losses resulting from these transactions is eliminated.

All the best, Farah

Dear Farah

I appreciate your reply , but it seems there is a bit confusion , i need answer very specific to this point ( if we are consolidating the associate entity on the Holding level only in the equity. we are not consolidating the balance sheet we take our part of their profit and add it to the profit ) in this case do we have to detail the interco transaction??? and eliminate them ???? as we eliminate other Interco transactions??
do we have to consider their balances as Interco or other creditors or debtors??

best regardsDear Tony

Please refer paragraph 29 of IAS 28 (2008). Perhaps that will answer your query.

RegardsDear All,

In my understanding, it is require toeliminate pre-profit by adjusting profit in the closing stock.

Thanks,

Tony,

Will be classified as intercoy payables/receivables and a note will be added to show the related party transaction balances.

Best regards,

See IAS 28.22: the investor’s share in the associate’s profits and losses resulting from these transactions (note upstream and downstream transactions) is eliminated.

Kind regards/Met vriendelijke groet

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Goodwill & Minority calculation

ifrslist — Thu, 28 Aug 2008 15:07:00 +0000

Dear All

If a company is issuing shares to its parent compnay on stage by stage basis then what will be procedure to calculate goodwill and minority interest.

for eg.

on 20/03/2008 – suppose a Company (ABC) – subsidiary comapny issues shares to its parent company (XYZ). at that time the % of share holding of parent is 33% and again on May 2008 ABC issues shares to XYZ. After the 2nd allotment the holding of XYZ becomes 70%.

Now please advice the method for calculating goodwill and minority interest for the Financials as on 31.12.2007.

Suraj

Dear Suraj

Your example is step or partial acquisitions. I can analyse your case as follows:

Example
ABC holds a 33% stake in XYZ and consolidates XYZ as a subsidiary. On 20 May 2008 the net identifiable assets of XYZ that were included in the consolidated balance sheet amounted to $50 million. At this date the assets had a fair value of $55 million. On 20 May 2008 ABC purchased a further 37% of the issued shares of XYZ for $22 million.

Under the principles we have just discussed the net assets of XYZ would be revalued to $55 million for consolidation purposes. Therefore, just prior to the purchase the minority interest in XYZ would be $36.85 million ($55 million X 67%). The effect of the share purchase would be to reduce the minority interest to 30% and so it would become $16.50 million. Therefore the reduction in the minority interest is $20.35 million. The group has paid $22 million to achieve this reduction of $20.35 million and so goodwill of $1.65 million would be recognised.

The rationale behind this treatment is that essentially the group has an 70% subsidiary. Therefore, the carrying value of its net identifiable assets in the consolidated financial statements should be based on fair value at the date the subsidiary became an 70% subsidiary. This applies whether the subsidiary was purchased in one transaction or in a series of transactions.

Best Regards

Mac

Sale of subsidiary Company ABC and Company DEF both own Company XYZ (50%0 each). Company...

Related posts brought to you by Yet Another Related Posts Plugin.

Consolidation of SPE

ifrslist — Thu, 28 Aug 2008 14:43:00 +0000

Hi Everyone

Need a little help on this one.

When it has been determined under SIC 12 that an SPE will need to be consolidated, where would one book the equity of the SPE in the consolidated financial statements of the parent entity? Does anyone in the group have a worked example of the consolidation procedure?

Thanks

Vatsala

It would simply a separate form of equity (call it Special equity or Other
equity) without control over the core parent company and subsidiaries and
with special rights in respect of the allocation of income.

Disclose the specialties around this part of equity and consider to separate
it from group equity but not as liabilities (in between them), disclose
headline from the SPE’s articles and indicate why it is still included.

I would be able to help you more but then we have to come to a contract,

Kind regards,

Henk

Dear

Consolidation procedure will be same.

Eliminate investment in SPV and take net assets of SPV (since SPV may
not have net assets , net assets of the compnay for which SPV is formed
if it has a control)

With Best Wishes and Regards

The information in this e-mail is confidential and may be legally privileged. It is intended solely for the addressee. Access to this e-mail by anyone else is unauthorized. If you have received this communication in error, please address with the subject heading “Received in error,” send to the original sender , then delete the e-mail and destroy any copies of it. If you are not the intended recipient, any disclosure, copying, distribution or any action taken or omitted to be taken in reliance on it, is prohibited and may be unlawful. Any opinions or advice contained in this e-mail are subject to the terms and conditions expressed in the governing KPMG client engagement letter. Opinions, conclusions and other information in this e-mail and any attachments that do not relate to the official business of the firm are neither given nor endorsed by it.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Equity accounting.

ifrslist — Thu, 28 Aug 2008 14:42:00 +0000

Arial;”>Hi

When a parent company preperaing consolidated financials lost control and reaches significant influence , attracking equity method.

The change in ownership of subsidiary should be accounted for subsequently or to restate the prior period.

That is equity method should be applied from the date of change or should do this restructring from prior period financial staement presented.

thanks

With Best Wishes and Regards

SHABI

Dear Shabih,

When part of an investment in a subsidiary is sold during the reporting period, the parent should record its investment after the disposal in the consolidated accounts as follows:

- If a parent sells a portion of its investment in a subsidiary but still retains a controlling interest, the minority interest in the results of the subsidiary would be calculated for the period from the date of disposal. Subsequent consolidated balance sheets should include the assets, liabilities, and operations of the subsidiary, and reflect the new minority interest.

- If the parent sells a controlling interest in the subsidiary but still retains significant influence over it, the subsequent results should be reported using the equity method. The remaining investment should be reflected in subsequent balance sheets as a single line item, using the equity method in accordance with IAS 28, Investments in Associates.

- If the parent sells a controlling interest in the subsidiary and retains some interest in the entity, but does not retain significant influence over it, the interest in the entity should be accounted for in accordance with IAS 39, Financial Instruments: Recognition and Measurement, from the date of the transaction. The carrying amount of the investment at the date the entity ceases to be a subsidiary shall be regarded as the cost on initial measurement of a financial asset in accordance with IAS 39.

When all of a subsidiary is sold (or if an interest is retained, but the interest does not allow the parent to exert significant influence over the subsidiary), and if the sale of the subsidiary qualifies as a discontinued operation, presentation of the discontinued operation should follow IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

So, as you can see, the application is prospectively not retroactively.

Hopes this could be useful,

Best Regards,

Rodrigo

Thanks Rodrigo

If this is my case:

Can I apply equity accounting from begining of the period????

I assume this is not part of a decision to discontinue the operations, it is merely a change in ownership to provide better opportunities for the investment (i.e. the investment is not held for sale).

Then this is a materiality question, first question is what is the impact of deconsolidation on net assets, turnover, operating result, if the year sums (income statement) or balance sheet amounts in itself are already affecting the financial statement materially (professional judgment) the de-cognition has to be pro-rato from the discontinuing date, so up to the date of de-consolidation consolidated full results in P&L, from that date on equity accounting with one line net result from investments. It might be necessary to provide an impact of the de-consolidation on an annual basis by stating the net assets and a summary of the income statement of the de-consolidated part for the year.

If the de-consolidation in itself is not material then it is simple, just start the net equity accounting from the beginning of the year.

There is off course also an in-between: The impact may be material but the transaction was that close to opening or ending balance date that either the complete income statement may be left out or the complete income statement may be left in.

So it is a matter of looking precisely at what is going on,

Henk

New book “Accounting for Equity and Other Comprehensive Income: Dual Reporting Under U.S. GAAP and IFRSs”. The book “Accounting for Equity and Other Comprehensive Income: Dual...

Related posts brought to you by Yet Another Related Posts Plugin.

Merger Entries

ifrslist — Thu, 28 Aug 2008 14:41:00 +0000

Dear all,

Please help in confirming the merger entry for the following case:

Company A acquired 50% interest in Company B during 2004. The other 50% was held by the Company C, Company A’s Parent Company. Upon acquisition, Company A recognized a goodwill under purchase method of accounting.

Cost 100

Investment in B – 50

Goodwill 50

During 2006, the 50% shares held by the Parent Company was transferred to Company A, giving it the full ownership of Company B. The parent agreed that the credit of 50% will go to ADDITIONAL PAID IN CAPITAL (APIC). During 2006, the following is the Stockholders’ equity of Company B:

Assets 300

Liabilities 100

Common Stock 100

Retained Earnings 50

Share-based compensation reserve 50

In 2007, a merger between Companies A and B took place. The merger will be accounted for using the pooling of interest method.

Upon consolidation of books, the following entry was made.

Assets 300

Goodwill 50

Liabilities 100

Investment in B 50

APIC ???

(50% of equity)

Thanks in advance!

Regards,

Grace

The pooling of interest method is not allowed under ifrs3 rules. you have to find an acquirer.

Best regards.

Dear All,

Could anyone suggest which articles of IAS are important for Treasury, Cash Flow and Working Capital Management.

Is there any web site link where I could find material about policies and techniques for managment of working capital?

Thank you.

Lado

New book “Accounting for Equity and Other Comprehensive Income: Dual Reporting Under U.S. GAAP and IFRSs”. The book “Accounting for Equity and Other Comprehensive Income: Dual...

Related posts brought to you by Yet Another Related Posts Plugin.

Transfer of shares (USGAAP)

ifrslist — Thu, 28 Aug 2008 14:40:00 +0000

Hello

i have got a question on transfer of shares involving share permium, can any one help ?

Facts :

(1) A holds 100% on C.

(2) C ’s capital structure : 10,000 shares of US$1 par value.

(3) A has invested in Co C of USD 1m for share capital of USD 10,000 and share premium of USD 990,000.

(4) C incurs a loss and has negative net assets value.

If structure changes that there is an immediate holding co of C named B, then A holds 100% on B and then B 100% on C.

Questions :

(1) Can A transfer the shares to B at consideration of USD 1 in the fact that C has negative NAV ?

(2) What is accounting entry in A’s books in USGAAP? written off the investment as impairment ?

(3) What is accounting entry in B’s books in USGAAP ? How to account for the investment ?

(4) Can we write off the share premium in C ?

Thanks,

Shirley

To start with is A holding its investment against cost or against equity value?

I presume equity value,

1. A has to transfer its holding to B against fair (market) value (transactions between related companies) as would be the case between normal parties, that value may be USD 1 (I do not know).

2. A will value the investment against net equity value/net assets value, based on the same accounting rules as used in the consolidated accounts. This is not an impairment but a ‘regular’ result on investment in subsidiaries (loss), accounted for in the income statement. An impairment would be a more permanent downward valuation based on more fundamental changes in the business environment etc that were not foreseen at the moment of investment.

3. B will account for C at the initial recognition at cost (e.g. USD 1) and then against net equity value/net assets value applying the same accounting rules as A and C. i.e. the value would be the same as in A’s books.

pan style=”font-size:10pt;font-family:Arial;color:navy;”>4. The share premium will only be reduced when paid back to the shareholders. The losses incurred in C will be reported under a separate reporting line in equity, for example accumulated losses or other reserves. Share premium will always remain a separate reporting line within equity, unless completely repaid to the owners of the share capital.

Hope this helps,

Henk

Let me clarify more on the case. Hope someone can help.

To start with is A holding its investment against cost or against equity value? equity value

I presume equity value,

1. A has to transfer its holding to B against fair (market) value (transactions between related companies) as would be the case between normal parties, that value may be USD 1 (I do not know). A, B and C still in a same group : A—> 100% in B—–>100% in C, just wondering the consideration/ purchase price of USD 1 is allowable even in related companies ? In normal case, if it is a 3rd party, there will be no problem.

I am asking on A’s books on company level when A disposes investment in C. Is the entry below is correct ?

Dr. Bank USD 1

Cr. Investment USD 1m

Cr. Impairment – P/L USD 999,999

B’s book on company level

Entry 1

Dr. Investment               USD 1,000,000 (if book as 1m investment, it can eliminate directly with share cap and share premium in C)

Cr. Impairment / Negative goodwill     USD 999,999 (should be in P/L or B/S?) [negative goodwill concept]

Cr. Bank    USD   1

Entry 2

Dr. Investment USD 1

Cr. Bank USD 1

If so, how can it eliminate the share cap and share premium (USD 1m) in C on consolidation level ?

Consolidation elimination adjustment :

Dr. Share capital and Share premium [C's books] USD 1m

Cr. Investment [B's books] USD 1

Cr. which a/c ???????? USD 999,999

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.