CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (1)

CONSOLIDATION – SOFP WITH ONE SUBSIDIARY

Consolidated SOFP (or Group SOFP) is line by line addition of all values in SOFPs of Parent (P) and Subsidiary (S), subject to
certain adjustments. Following are basic eliminations / calculations / workings which are essential for a consolidation
question:
(a) GOODWILL / NEGATIVE GOODWILL

Consideration transferred for acquisition of controlling interest is mostly different from value of S’s identifiable
net assets at acquisition date. This difference is called “goodwill” (if +ve) and “negative goodwill or bargain
purchase gain” (if –ve).

IFRS 3 allows to carry NCI in Group balance sheet at:

- Proportionate share of fair values of net assets of “S” OR
- Fair value of NCI (i.e. Full goodwill method)

(i) NCI valued at proportionate share (ii) NCI valued at Fair value

Consideration transferred Consideration transferred

Less: P’s share in S’s identifiable net assets at acquisition Fair value of NCI
Less: S’s identifiable net assets at acquisition
Goodwill / (negative goodwill) Goodwill / (negative goodwill)

Irrespective of valuation method of NCI:

 Goodwill is shown as a non-current asset in group balance sheet
 Negative goodwill is added to P’RE

(b) POST ACQUISITION PROFITS AND OTHER RESERVES OF “S”

(i) P’s share in S’s post acquisition profits are ADDED to P’s RE to make it Group RE
(ii) P’s share in S’s post acquisition other reserves (e.g. revaluation surplus) are ADDED to P’s other
reserves in Group reserves

Acquisition related costs:

Acquisition related transactions costs incurred by P are considered as expense for the purpose of consolidation. If in
question, such costs are included in cost of investment appearing in P’s SOFP, then:

DEDUCT from Investment in “Goodwill” working

DEDUCT from P’s RE as an expense in “Group RE” working

(c) NON CONTROLLING INTEREST [NCI]

It is shown as a part of equity in Group balance sheet and represents portion of S’s net assets that are not
owned by P

(a) NCI valued at proportionate share (b) NCI valued at Fair value

NCI is valued at: NCI is valued as:

(i) Proportionate share of S’s net assets at (i) Fair value of NCI at acquisition date PLUS
acquisition date PLUS
(ii) NCI share in S’s post acquisition reserves (ii) NCI share in S’s post acquisition reserves

“S’s reserves” include revaluation reserve raised for group revaluation policy application

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (2)

Following adjustments are made for consolidation of statement of financial positions:

1. IMPAIRMENT OF GOODWILL

Goodwill is tested for impairment annually. In questions, impairment loss of goodwill may be:
- Given OR
- Determined by deducting “recoverable amount” from “carrying amount” of goodwill

Consolidation adjustment:

(a) NCI valued at proportionate share (b) NCI valued at Fair value

Total accumulated impairment loss is: Total accumulated impairment loss is:
(i) DEDUCTED from goodwill in “Goodwill (i) DEDUCTED from goodwill in “Goodwill
Working” Working”
(ii) DEDUCTED from P’s RE in “Group RE (ii) DEDUCTED from S’s RE in “Group RE working”
Working”

Memorandum entry:
Dr. Group RE Dr. Group RE (P’s share)
Cr. Goodwill Dr. NCI (NCI share)
Cr. Goodwill (Total)

2. INTER COMPANY BALANCES

Examples:
- Debtor and creditor [due to inter-company trading]
- Loan (asset) and loan (liability) [due to inter-company loan]
- Inter-company current account
- P’s investment (asset) in S’s debentures (liability)
- Inter-company finance lease

Reconciliation of inter-company balances:

If balances (receivable / payable) do not agree then following may be the reasons alongwith relative
adjustment:

Reason Adjustment
(1.) Error Correct error accordingly in relevant books
(2.) Cash in transit Dr. Cash (i.e. ADD in cash)
Cr. Receivables (i.e. DEDUCT from receivables)
(3.) Goods in transit Dr. Inventory (i.e ADD in inventory)
Cr. Payables (i.e. ADD to payables)

Elimination of inter-company balance:

Since balances have now agreed, these are ELIMINATED

Memorandum entry:
Dr. Payable (Agreed / adjusted balance)
Cr. Receivable

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (3)

3. UNREALIZED PROFIT IN INVENTORY [URP]

URP is the profit included in the amount of inventory (including goods in transit) out of inter-company sale.
Inventory value may be given in question or mentioned as a proportion of intercompany sale.
Calculation of URP:
URP = Inventory x GP margin %
OR
Inventory x GP markup / (100 + GP markup)
OR
Total profit earned in the inter-company sale x % goods held in stock
Consolidation adjustment:

P to S sale S to P sale

URP is DEDUCTED from: URP is DEDUCTED from:

(i) Inventory in Group SOFP (i) Inventory in Group SOFP
(ii) P’ RE in Group RE working (ii) S' RE in Group RE working

Memorandum entry:
Dr. Group RE Dr. Group RE
Cr. Inventory Dr. NCI
Cr. Inventory

URP adjustment on goods which have been written down to NRV by buyer:
URP adjustment will be made at “URP – NRV write down already recorded”. If NRV write down is more than
URP, then no adjustment for URP is needed.

4. (a) FAIR VALUE ADJUSTMENT FOR S’s NET ASSETS

IFRS 3 requires recognition of identifiable net assets of S at their acquisition-date fair values. Therefore, certain
fair value adjustments are needed. Information about fair value adjustments at acquisition date may be
available as:
- Difference between fair values and book values is given (e.g. building was overvalued by Rs. 50,000) OR
- Both Fair values and book values of S assets and liabilities are given (i.e. net assets)

Exception to this fair value rule:

Following are the exceptions to the recognition and measurement rule discussed above:
o DTA/DTL arising from net assets of S acquired. [It shall be measured as per IAS 12]
o Indemnification asset obtained on acquisition i.e. when S indemnifies P against any uncertainty. [It shall
be measured at the same time and same basis as the indemnified item. (i.e. initial as well as subsequent)]
o ROU and lease liability of S. [Both shall be measured as per IFRS 16 rules, using the remaining lease
payments, as if it were a new lease at the acquisition date]. P is not required to recognize ROU and lease
liability for short term lease or low value assets’ lease.

Asset/Liability still exists in books of S Asset/Liability was sold / settled after acquisition
For asset: For asset:
FV adjustment (increase) is ADDED to: FV adjustment (increase) is:
(i) S’ net assets in “Goodwill working” (i) ADDED to S’s net assets in “Goodwill working”
(ii) Relevant asset’s NBV in Group SOFP (ii) DEDUCTED from S' RE in “Group RE working”

For liability: For liability:

FV adjustment (increase) is: FV adjustment (increase) is:
Nasir Abbas FCA
 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (4)

(i) DEDUCTED from S’ net assets in “Goodwill (i) DEDUCTED from S’s net assets in “Goodwill
working” working”
(ii) ADDED to Relevant liability’s NBV in Group SOFP (ii) ADDED to S' RE in “Group RE working”

Memorandum entry:
Dr. Relevant Asset Dr. Group RE
Cr. Goodwill Dr. NCI
Cr. NCI Cr. Goodwill
Cr. Relevant liability Cr. NCI

Notes:
- In case of FV adjustment (decrease) to S’s net assets, above adjustments will be inverse.
- If subsequently S has accounted for any such fair value adjustment in its books, then reverse it to the extent
of the amounts above fair value adjustments.

4. (b) EXTRA DEPRECIATION FOR FAIR VALUE ADJUSTMENT OF DEPRECIABLE ASSETS

It is calculated using same depreciation basis as of S in its books. This adjustment is not applicable if related
asset has been sold / realized after acquisition date.
Calculation of Extra accumulated depreciation:
= FV adjustment ÷ remaining useful life x years since acquisition
(above formula is for straight line method)

Consolidation adjustment:
Extra Accumulated depreciation is DEDUCTED from:
(i) Relevant asset in Group BS
(ii) S’s RE in Group RE working

Memorandum entry:
Dr. Group RE
Dr. NCI
Cr. PPE
In case of negative adjustment to S’s net assets, above adjustments will be reversed

5. (a) PROFIT ON INTER-COMPANY SALE OF NON-CURRENT ASSET

Profit in inter-company sale of non-current asset is unrealized unless the asset is fully depreciated by buyer.
Calculation of Profit:
Profit = Sale value of Asset x margin %
OR
Sale value of Asset x markup / (100 + markup)

Consolidation adjustment:
P to S sale S to P sale

Profit is DEDUCTED from: Profit is DEDUCTED from:

(i) Relevant Asset in Group SOFP (i) Relevant Asset in Group SOFP
(ii) P’ RE in Group RE working (i.e. seller) (ii) S' RE in Group RE working (i.e. seller)

Memorandum entry:
Dr. Group RE Dr. Group RE
Cr. Relevant asset Dr. NCI
Cr. Relevant asset

5. (b) EXCESS DEPRECIATION ON INTER-COMPANY SALE OF NON-CURRENT ASSET

Nasir Abbas FCA
 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (5)

As asset is depreciated, a portion of seller’s profit is realized. Therefore, excess depreciation on profit is
deducted from seller’s profit on this sale OR added back to seller’s RE.
Calculation of Accumulated excess depreciation:
= Profit x depreciation % x years since sale of asset

[It is calculated using same depreciation basis as of buyer company in its books]
Consolidation adjustment:

P to S sale S to P sale
Excess accumulated depreciation is ADDED to: Excess accumulated depreciation is ADDED to:
(i) Relevant Asset in Group SOFP (i) Relevant Asset in Group SOFP
(ii) P’ RE in Group RE working (i.e. seller) (ii) S' RE in Group RE working (i.e. seller)
Memorandum entry:
Dr. Relevant asset Dr. Relevant asset
Cr. Group RE Cr. Group RE
Cr. NCI

ALTERNATIVELY [5 (a) and (b) can be combined as follows]

5. UNREALIZED PROFIT ON INTER-COMPANY SALE OF NON CURRENT ASSET

Unrealized profit is the profit included in carrying amount of a non current asset transferred in inter-company
sale.
Calculation of Unrealized profit:
URP = NBV of Asset x margin %
OR
NBV of Asset x markup / (100 + markup)
OR
Profit on sale – excess depreciation charged by buyer to date
OR
NBV appearing in books of buyer – NBV (ignoring profit)

Consolidation adjustment:

P to S sale S to P sale

URP is DEDUCTED from: URP is DEDUCTED from:

(i) Relevant Asset in Group SOFP (i) Relevant Asset in Group SOFP
(ii) P’ RE in Group RE working (i.e. seller) (ii) S' RE in Group RE working (i.e. seller)

Memorandum entry:
Dr. Group RE Dr. Group RE
Cr. Relevant asset Dr. NCI
Cr. Relevant asset

6. S’s INTANGIBLE ASSET RECOGNIZED AT ACQUISITION

Consolidation adjustment:
The acquirer shall recognize, separately from goodwill, the identifiable intangible assets acquired in a
business combination (e.g. internally generated brand, internally generated customer list) in Group SOFP
even if their recognition was not allowed to S in accordance with IAS 38. The assembled workforce is not
an identifiable asset to be recognized separately from goodwill, any value attributed to it is subsumed into
goodwill. This recognition is treated like a fair value adjustment of an asset which had “zero” carrying
amount in S’s books.

A contingent asset (as defined in IAS 37) shall not be recognized at the acquisition date.
Nasir Abbas FCA
 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (6)

Fair value at acquisition date is:

(i) ADDED to Intangible assets in Group SOFP
(ii) ADDED to S’s net assets in “Goodwill working”

Memorandum entry:
Dr. Intangible assets
Cr. Goodwill
Cr. NCI

Accumulated amortization since acquisition is:

(i) DEDUCTED from relevant asset in Group SOFP
(ii) DEDUCTED from S’ RE in Group RE working

Memorandum entry:
Dr. Group RE
Dr. NCI
Cr. Intangible assets

[If subsequently such items were sold by S, then acquisition-date fair value is ADDED to S’s net assets in
“Goodwill working” and DEDUCTED from “S RE” in Group RE working. Moreover, no adjustment for
amortization is needed.]

7. S’s CONTINGENT LIABILITY RECOGNIZED AT ACQUISITION

Consolidation adjustment:
IFRS 3 allows the recognition of a contingent liability of S if it is a present obligation (i.e. not a possible
obligation) that arises from past events and its fair value can be reliably measured.

Case 1 – If obligation still exists at year end but S has subsequently not recognized any liability:
Fair value at acquisition date:
(i) DEDUCTED from S’s net assets in “goodwill working”
(ii) ADDED to current liabilities in Group SOFP

Case 2 – If S has subsequently recognized a liability at an amount different from acquisition date fair value:
1) Fair value at acquisition date is:
(i) DEDUCTED from S’s net assets in “goodwill working”
(ii) ADDED to current liabilities in Group SOFP

2) Lower of “acquisition date fair value” and “amount recognized by S” is:

(i) ADDED to S’RE in Group RE working
(ii) DEDUCTED from current liabilities in Group SOFP

Case 3 – If obligation is settled by year end / S has subsequently recognized liability at acquisition date fair
value:
Fair value at acquisition date:
(i) DEDUCTED from S’s net assets in “goodwill working”
(ii) ADDED to S’RE in Group RE working

8. MODES OF CONSIDERATION GIVEN FOR INVESTMENT [OTHER THAN CASH]

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (7)

(1) Loan note issue (or debentures, bonds etc.)

P may issue debentures as a purchase consideration. In questions, generally, it is unrecorded. Before
eliminating investment for consolidation, ensure whether this mode of consideration has been recorded by
“P” in its books

Calculation of cost of investment:

Cost of investment = no. of P’s notes issued x issue price
[Here: P’s notes issued = S’s shares acquired x loan note exchange ratio]

Consolidation adjustment: (If still unrecorded)

(i) INCLUDE this amount in P’s investment in “Goodwill working”
(ii) SHOW this amount in “Non-current liabilities” in Group SOFP

If P has already accounted for this issue then no adjustment required in non-current liabilities

(2) Share exchange

P may issue its ordinary shares as purchase consideration. In questions, generally, it is unrecorded. Before
eliminating investment for consolidation, ensure whether this mode of consideration has been recorded by
“P” in its books

Calculation of cost of investment:

Cost of investment = no. of P’s shares issued x market value of P’s shares at acquisition.
[Here: P’s shares issued = S’s shares acquired x share exchange ratio]

In case of consideration only in form of share exchange, if fair value of P’s shares is not reliably
measurable then fair value of S’s shares is used to find cost of investment.

Consolidation adjustment: (If still unrecorded)

(i) INCLUDE this amount in P’s investment in “Goodwill working”
(ii) ADD nominal value of shares in P’s share capital in Group SOFP
(iii) ADD excess of (i) over (ii), if any, to P’s share premium in Group SOFP

If P has already accounted for this issue then no adjustment required in share capital and premium.

(3) Deferred consideration

P may defer cash payment as purchase consideration. In questions, generally, it is unrecorded.

Calculation of cost of investment:

Cost of investment = Present value of deferred consideration at acquisition date discounted at P’s cost of
capital (or any other given discount rate)

Consolidation adjustment: (If still unrecorded)

(i) INCLUDE above amount in P’s investment in “Goodwill working”
(ii) SHOW present value of deferred consideration at SOFP date as liability in Group SOFP
(iii) DEDUCT excess of (ii) over (i) from P’s RE as finance cost in “Group RE working”

(4) Contingent consideration

P may commit a further payment (generally a cash payment) contingent upon certain performance conditions
to be met in future. It is initially recorded as a liability at acquisition date fair value. It’s fair value is updated
at end of every year. It’s fair value may also be calculated as “committed cash amount x probability of meeting
the conditions”. In questions, generally, it is unrecorded.

Calculation of cost of investment:

Nasir Abbas FCA
 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (8)

Cost of investment = Fair value of contingent consideration at acquisition date

Consolidation adjustment: (If still unrecorded)

(i) INCLUDE above amount in P’s investment in “Goodwill working”
(ii) SHOW fair value of contingent consideration at SOFP date as liability in Group SOFP
(iii) ADD/DEDUCT any decrease/increase in fair value of contingent consideration since acquisition date
(i.e. changes resulting from events after the acquisition date) from P’s RE in “Group RE working”

(5) Other assets (e.g. land)

P may transfer any other asset (e.g. property) as purchase consideration. In questions, generally, it is
unrecorded.

Calculation of cost of investment:

Cost of investment = Fair value of the asset transferred at acquisition date

Consolidation adjustment: (If still unrecorded)

(i) INCLUDE above amount in P’s investment in “Goodwill working”
(ii) DERECOGNIZE the carrying amount of asset from Group SOFP
(iii) ADD/DEDUCT any gain/loss (i.e. fair value – carrying amount) in P’s RE in “Group RE working”

9. ACQUISITION DURING THE YEAR

Consolidation adjustment:
Only effect is on the calculation of Pre and Post acquisition reserves as follows:
Pre acq. reserves = S’s reserves at balance sheet date – income for the year x n/12
(n = no. of months from acquisition to year end)

Post acq. reserves= S’s reserves at balance sheet date – pre acquisition reserves
OR
Income for the year x n/12

10. ADJUSTMENT FOR GROUP ACCOUNTING POLICIES

Group member should follow uniform accounting policies. However, if S follows different accounting
policies, then adjustments are made while consolidation to convert figures from S financial position in
accordance with group policies.

(i) If inventory valuation method is changed

ADD / (DEDUCT) any increase / (decrease) in inventory value due to policy change effect from:
- “Inventory” in Group SOFP
- “S RE” in Group RE working

(ii) If Group follows revaluation model and S follows cost model

ADD post acquisition increase in fair value of relevant assets to:
- “relevant asset” in Group SOFP [Total increase]
- “P’s revaluation surplus [P’s share of increase]
- “Share in S’s other reserves” in NCI working [NCI’s share of increase]

11. DIVIDEND PAID / PAYABLE BY “S”

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (9)

Types of dividends:
Pre acq. dividend: Dividend paid / payable (after acquisition) out of pre-acquisition profits
Post acq. dividend: Dividend paid / payable out of post-acquisition profits

Consolidation adjustment of pre-acquisition dividend

If P has recognized it as an income, then:

(i) DEDUCT it from Investment in “Goodwill working” AND
(ii) DEDUCT if from P’s RE in “Group RE working”

Consolidation adjustment of post-acquisition dividend

Adjustments are tabulated on last page using following example:

Example
S declares a dividend of Rs. 100
P owns 80% shares of S

12. OTHER ADJUSTMENTS

Inter-company Finance Eliminate:

lease “Lease liability” and “Lease receivable” and the difference should be closed in RE of the
company.

Inter-company Eliminate:
operating lease “ROU asset” and “Lease liability” and adjust difference of both in lessee’s RE.

[If underlying asset was property, then lessor must have been following IAS 40. But from
group point of view it is PPE rather than Investment property, therefore, IAS 40
accounting shall be reversed and IAS 16 accounting shall be followed.]

Inter-company sale of In case of inter-company sale of property, if buyer rents out the property and follows
investment property fair value model for investment property, then no adjustment for URP shall be made.

Un-realized loss on Calculation of unrealized loss is same as studied for URP but the treatment is with
inter-company sale of inverse signs. However, if losses indicate an impairment, then no adjustment is needed
goods/PPE for URL.

Provisional amounts In 1st year of acquisition, if values are not yet finalized at year end then consolidation
will be made using provisional amounts. Next year, if provisional amounts are revised,
these adjustments shall be made retrospectively from acquisition date.

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (10)

FORMATS AND WORKINGS

P Group
Consolidated Statement of Financial Position
As at …………………..
Rs.
NON-CURRENT ASSETS:

PPE XXX
(P’s + S’s + Fair value adj. at acquisition – Acc. extra dep. on FV adj. – URP on asset sale + revaluation
policy application +/- any other adjustment)

Intangible assets XXX

(P’s + S’s + NBV of Identifiable asset recognized at acquisition)

Goodwill (W – 1) XXX

Investment XXX
(P’s + S’s – P’s investment in S eliminated)

CURRENT ASSETS:

Inventory XXX
(P’s + S’s – URP [P to S / S to P] + Goods in transit)

Receivables XXX
(P’s + S’s +/- correction of error– cash in transit – intercompany balance + any other asset recognized at acquisition)

Dividend receivables XXX

(P’s + S’s + unrecorded dividend – intercompany receivable)

Cash / Bank XXX

(P’s + S’s + Cash in transit +/- correction of error)

XXX

Rs.
CAPITAL AND RESERVES:

Share capital XXX

(P’s + unrecorded P’s shares issued as purchase consideration)

Share premium XXX

(P’s + unrecorded premium on P’s shares issued as purchase consideration)

Other reserves (W – 2) XXX

Retained earnings (W – 3) XXX

Non-controlling interest (W – 4) XXX

NON-CURRENT LIABILITIES:

Loan notes / Debentures XXX

(P’s + S’s – Inter company balance + unrecorded P’s loan notes issued as purchase consideration)

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (11)

Deferred consideration XXX

(Present value at SOFP date)

Contingent consideration XXX

(Fair value at SOFP date)

CURRENT LIABILITIES:

Payables XXX
(P’s + S’s + goods in transit +/- correction of error – intercompany balance + contingent liab. recognized)

Dividend payable XXX

(P’s + S’s + unrecorded dividend – intercompany payable)

XXX

WORKINGS

(W – 1) Goodwill

Case I – NCI is valued at Fair value Rs. Rs.

Investment in ordinary shares:

Cash paid XXX
Loan notes issued XXX
P’s shares issued XXX
Deferred consideration XXX
Any other non-cash asset transferred XXX
Contingent consideration XXX XXX
Fair Value of NCI (Note 1) XXX
XXX

S’s Capital XXX

Add: S’s Premium XXX
Add: S’s Pre-acquisition other reserves XXX
Add: S’s Pre-acquisition RE XXX
Add/Less: Fair value adjustment XXX
Less: Liability recognized (XXX)
Add: Asset recognized at acquisition XXX
(XXX)
Goodwill at acquisition XXX
Less: Accumulated impairment loss (Total) (XXX)
Carrying amount of goodwill XXX

Note 1: Fair value of NCI can be determined as follows in exam questions:

1) Fair value of NCI is given in question.

2) Share price of S at acquisition date is given:

Fair value of NCI = no. of shares held by NCI x Share price

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (12)

Case II – NCI is valued at proportionate share Rs. Rs.

Investment in ordinary shares
Cash paid XXX
Loan notes issued XXX
P’s shares issued XXX
Deferred consideration XXX
Any other non-cash asset transferred XXX
Contingent consideration XXX XXX

S’s Capital XXX

Add: S’s Premium XXX
Add: S’s Pre-acquisition other reserves XXX
Add: S’s Pre-acquisition RE XXX
Add/Less: Fair value adjustment XXX
Less: Liability recognized (XXX)
Add: Asset recognized at acquisition XXX
XXX
Group share @ (% share in ordinary shares) (XXX)
Goodwill at acquisition XXX
Less: Accumulated impairment loss (Total) (XXX)
Carrying amount of goodwill XXX
(W – 2) Other reserves (e.g. revaluation surplus)
Rs. Rs.
Parent’s other reserves XXX
Add: S’s post acquisition other reserves XXX
Group share @ (% share in ordinary shares) XXX
XXX
(W – 3) Retained earnings
Rs. Rs.
Parent’s RE XXX
Less: Accumulated impairment loss of goodwill[Note 2] (XXX)
Less: URP on goods [ P to S ] (XXX)
Less: URP on asset sale [ P to S ] (XXX)
Less: Finance cost on deferred consideration (XXX)
Less: change in fair value of contingent consideration (XXX)
Add / Less: correction of error XXX
Add: negative goodwill (total) XXX
Add: Unrecorded income (including dividend from S) XXX
XXX
Add: S’s RE XXX
Less: Pre-acquisition RE (XXX)
Less: Acc. Impairment loss of goodwill [Note 2] (XXX)
Less: URP on goods [ S to P ] (XXX)
Less: URP on asset sale [ S to P ] (XXX)
Less: FV adjustment of asset sold after acquisition (XXX)
Less/Add: Extra depreciation on FV adjustment (XXX)
Less: Amortization on asset recognized at acq. (XXX)
Less: change in value of contingent liab. recognized (XXX)
Less: unrecorded post acquisition dividend (XXX)
Add / Less: correction of error XXX
Add: unrecorded income XXX
XXX
Group share @ (% share in ordinary shares) XXX
XXX

Nasir Abbas FCA

 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (13)

Note 2:
NCI is valued at fair value: Impairment loss of goodwill is deducted from S RE
NCI is valued at proportionate basis: Impairment loss of goodwill is deducted from P RE

(W – 4) Non controlling interest

Case I – NCI is valued at Fair value Rs.

Fair value of NCI at acquisition date XXX

Add: Share in S’s post acquisition other reserves (W – 2) XXX

[NCI % share in ordinary shares]

Add: Share in S’s post acquisition RE (W – 3) XXX

[NCI % share in ordinary shares]
XXX

Case II – NCI is valued at proportionate share Rs.

Share in S’s net assets at acq. (W – 1) XXX

[NCI % share in ordinary shares]

Add: Share in S’s post acquisition other reserves (W – 2) XXX

[NCI % share in ordinary shares]

Add: Share in S’s post acquisition RE (W – 3) XXX

[NCI % share in ordinary shares]
XXX

Nasir Abbas FCA

Chapter-12 CONSOLIDATION – SOFP WITH ONE SUBSIDIARY (14)

POST AQCUISITION DIVIDEND

PAID NOT YET PAID [Declared before year end]

1-Recorded by both 2-Recorded by both 3-Not recorded by (P) 4-Not recorded by (S) 5-Not recorded by both

Entries which have been made in separate books:

P S P S P S P S P S
Cash 80 R.E. 100 D.R. 80 R.E. 100 R.E. 100 D.R. 80
Income 80 Cash 100 Income 80 D.P. 100 D.P. 100 Income 80

Consolidation adjustments required – In Group balance sheet:

No adjustment required. Eliminate Inter company (i). Add P’s share in S’s (i). Deduct S’s total dividend (i). Add P’s share in S’s
balance of 80 dividend to P’s RE in “Group from S’s post acquisition dividend to P’s RE in “Group
RE working” profits RE working”
Dividend Payable 80
Dividend Receivable 80 Dividend Receivable 80 Group RE 80 Dividend Receivable 80
Group RE 80 NCI 20 Group RE 80
Dividend Payable 100
(ii). Then eliminate inter (ii). Deduct S’s total dividend
company balance of 80 (ii). Then eliminate inter from S’s post acquisition
company balance of 80 profits
Dividend Payable 80 Group RE 80
Dividend Receivable 80 Dividend Payable 80 NCI 20
Dividend Receivable 80 Dividend Payable 100

(iii). Then eliminate inter

company balance of 80

Dividend Payable 80
Dividend Receivable 80

Nasir Abbas FCA