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程序代写案例-QLD 4000
时间：2021-09-05
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Accounting For Corporate Structure
ACCT3103/ACCT7104
期中復習資料
Lecture 1+2
1. Acquisition of a Single Asset
y AASB 116 – PPE
y Measurement at initial recognition:
{ Measured at cost (fair value (FV) if no cost)
y Measurement after recognition:
{ Asset subject to depreciation and impairment
{ Measured by asset class using either:
Cost model (cost less any accumulated depreciation/accumulated impairment losses)
or,
Revaluation model
(FV less any subsequent accumulated depreciation/accumulated impairment losses.
Must be applied with sufficient regularity to avoid material variation from FV)
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2. Acquisition of a Collection of Assets ( Not a
Business) AASB 3 and AASB 116
3. Acquisition: Collection of Assets [direct business acquisition]
Direct Acquisition of a Business
y Determining whether a particular set of assets and activities is a business should be
based on whether the integrated set is capable of being conducted and managed as a
business by a market participant.
y Thus, in evaluating whether a particular set is a business, it is not relevant whether a
seller operated the set as a business or whether the acquirer intends to operate the set
as a business (AASB 3B.11)
y In the absence of evidence to the contrary, a particular set of assets and
activities in which goodwill(intangible) is present shall be presumed to be a
business. However, a business need not have goodwill.
y we must account for the acquisition in accordance with AASB 3 as a “business
combination”
y goodwill (an overpayment in excess of the fair value of a collection of assets)
y gain on bargain purchase (an underpayment)
4. Acquisition: Indirect Business acquisition (acquisition of shares in investee)
y AASB 3 distinguishes 2 types of acquisitions that result in business combinations:
Asset Fair Value
Plant 200,000
Land 150,000
Vehicles 175,000
Total FV of assets
acquired
$525,000
Purchase
consideration
$500,000
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{ Direct acquisition from a vendor of a collection of net assets that constitute a
business
{ Acquisition of sufficient equity (shares) to control the entity that owns
the business
1. Financial assets – no special business relationship between investor and investee
(ACCT3102)
y The important point for our purposes is that this type of equity investment does
not give rise to significant influence, joint control or control by the investor over
the investee.
2. Investments providing the power to exert control, joint control or significant influence
(ACCT3103)
y Significant influence
y joint control
y control
1.Significant Influence
y Significant influence is defined as:
“…the power to participate in the financial and operating policy decisions of the investee
but is not control or joint control over those policies.”
y Indicators of Significant Influence
o Representation on the investee’s Board or equivalent governing body
o Participation in policy-making processes, including decisions about dividends
and other distributions
o Material intra-entity transactions (economic dependency)
o Interchange of management personnel (organisational dependency)
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o Provision of essential technical information
(technological dependency)
y If the investor holds, directly or indirectly, 20% or more of the voting power of an
investee, it is presumed that the investor has significant influence, unless it can be
clearly demonstrated that this is not the case. At a holding of < 20%, directly or
indirectly, it is presumed that the investor does not hold significant influence, unless
such influence can be clearly demonstrated.
2.Joint Control
? Acquisitions that give the investor shared control of the investee’s economic
resources
? Joint Control is defined as:
“The contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities requires the unanimous consent of the
parties sharing the control.”
3.Control (!!!mid exam focus)
y Control is defined as :"An investor controls an investee when it is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee"
y An investor controls an investee if and only if the investor has all the following 必須
全部滿足
a)power over the investee;
b)exposure, or rights, to variable returns from its involvement with the
investee
c) the ability to use its power over the investee to affect the amount of the
investor’s returns
Financial reporting consequences of CONTROL
? If an investor entity controls an investee, then a parent- subsidiary relationship exists
? In combination, the investor entity and its subsidiary(s) form a group
? Where the group is a reporting entity, it must prepare
consolidated financial statements
? A statement of financial position
? A statement of profit or loss and other comprehensive income
? A statement of changes in equity
? A cash flow statement
? Notes
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Lecture 3
Consolidated financial reporting
? The objective of consolidated financial reporting is to show the operating
results and financial position of a group of business entities under common
control as if they were operating as a single entity controlled by the same
management
? Consolidation undoes this legal separation and focuses on reporting the results
of transactions between the group and external parties
Consolidation Process
? Consolidated financial statements are prepared by
(i) Aggregating (combining), line by line, like items of assets,
liabilities, equity, income and expenses
(i) Adjusting these combined figures for intra-group transactions between
entities within the group
? This line-item combining and adjusting of financial statements occurs on the
consolidation worksheet
? Important that you understand that consolidation is undertaken
periodically via the consolidation worksheet
? Consolidation does not involve adjustments in the general ledger accounts of
either the parent or the subsidiaries.
? Further, there is no consolidated general ledger or carried forward
consolidated balance.
? Consolidated financial statements are an additional set of financial
statements and are prepared via a consolidation worksheet.
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Consolidation: step one
? The first step in the consolidation process is to aggregate (add together) the line-by-
line items included in the financial statements of each entity in the group
? Entities in the group must have the same reporting period
? Where financial reporting periods are different they must be synchronised with 12
months of acquisition (s323D)
? Group entities must adopt uniform accounting methods
Consolidation: step two
1. Elimination of the parent’s investment in each subsidiary against the proportion of
the subsidiary’s equity acquired on acquisition date (AASB 10B:86(b)) (Topic 2 & 3)
2. Elimination of intra-group balances, transactions, income, expenses and dividends in
full (AASB 10B:86(c)) (Topic 4)
3. Identification and calculation of the non-controlling interest in the profit or loss for
the period, in the total comprehensive income for the period and in the net assets of
the consolidated subsidiaries (AASB 10B.94, AASB 101.81B) (Topic 5 & 6)
Consolidation: step three
The third step in the consolidation process is to transfer (post) the consolidation
adjusting entries to the consolidation worksheet and calculate the consolidated
(adjusted) balances for each item
Consolidation – step four
The last step in the consolidation process is to use the consolidated column on the
worksheet as the basis for the group financial statements
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1. Date of acquisition
Acquisition date is ‘… the date on which the acquirer obtains control of the acquiree’
(AASB 3:8)
y The date is determined on the substance of the transaction
y If the acquisition is made in a single transaction, the date of exchange is the
date the acquirer acquires the power to control
y If the acquisition is through a series of transactions, the date when the
investor achieves control is the date of acquisition
Determining the correct acquisition date is important as the following are affected by
the choice of acquisition date:
y It is a determinant of the fair value of the cost of acquisition
y It is a determinant of the fair value of the net assets of the
subsidiary at acquisition - termed pre-acquisition equity
y Thus it is a determinant of the income and changes in equity of the subsidiary
in the period subsequent to acquisition – termed post-acquisition equity
y Measurement of the non-controlling interest
2. Cost of an Investment in a Subsidiary
y The consideration (cost of acquisition) transferred in a business combination
shall be measured at fair value, which shall be calculated as
常出現的收購價（consideration） :
1. cash
2. PPE
3. Shares (需要注意考試的時候一定要用 DOA市場價格來算股票價
格)
4. Cash payable in future (***考試的時候要計算 Present value)
y the sum of the acquisition-date fair values of
{ the assets transferred by the acquirer,
{ the liabilities incurred or assumed by the acquirer to former owners of
the acquire; and
{ the equity interests issued by the acquirer
3. Acquisition-related Cost收購相關費用-不記錄到 consolidation
y Acquisition-related costs are costs the acquirer incurs to effect a business
combination. Those costs include finder's fees, advisory, legal, accounting,
valuation and other professional or consulting fees.
y The acquirer shall account for acquisition-related costs as expenses in the
periods in which the costs are incurred and the services are received, with one
exception.
If the cost of acquisition is > the equity acquired in the net assets of the subsidiary,
the difference is recognised as a measure of goodwill
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If the cost of acquisition is < the equity acquired in the net assets of the subsidiary,
the difference is recognised as a ‘gain on bargain purchase’
4. Cost of investment > equity acquired (goodwill)
y The excess is recognised as goodwill on consolidation (not in the accounts of the
acquirer Parent)
y The goodwill is attributable to relevant group cash generating units – not necessarily
attributable to subsidiary
y It is tested for impairment at least annually
y The impairment is recognised on consolidation
y There is no recognition of recovery of impairment losses
5. Intra-group dividends
y the parent entities must account for all dividends declared by a subsidiary after
acquisition date as dividend revenue regardless of whether distributed from pre-
acquisition or post-acquisition equities (AASB 127:12)
y Elimination of intra-group dividends is a common consolidation
adjustment
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Topic 3+4 Consolidation: Fair Value Adjustments & Tax Effects
Consolidation Process
Step 1
? Record parents and subsidiaries line-by-line financials on the consolidation
worksheet
? Line-by-line aggregation of the parent and subsidiaries accounts.
Step 2
? Acquisition analysis to determine goodwill or gain on bargain purchase
? Elimination of the parent’s investment in each subsidiary
? Elimination of intra-group transactions in full
? Identification & calculation of non-controlling interest (NCI)
Step3
? Post (transfer) consolidation adjusting entries to the consolidation worksheet
? Calculate balances
Step4
? Prepare group financial statements
Tax Consolidation
? Australian income tax law allows:
o A group to be treated as a single taxable entity under certain conditions
? Tax consolidation:
o Consolidated group is a head entity and its wholly owned, Australian entities that
qualify as subsidiary members under tax law
o Is not mandatory
o When a group chooses to be taxed on a consolidated basis:
Each of the entities in the tax consolidated group is treated as part of the parent company
and a single consolidated tax return is prepared
? Strict assumption in ACCT3103:
? That the tax consolidation regime was not adopted and therefore every
company is assumed to be a separate taxable entity.
? Tax adjustments relating to consolidation adjusting entries are made on
consolidation.
Rule of Thumb:
? If any consolidation journal/adjustment has an asset or a liability in it that is not
exactly contra’d by a different asset/liability, there will be a deferred tax effect on the
group accounts
Two exceptions
? Goodwill/accumulated impairment of goodwill (see section 3.3.4)
? intra-group dividends (exempted due to implicit assumption of fully franked dividends
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Acquisition analysis
1. Identifying the acquirer
2. Determining the acquisition date
3. Recognising and measuring the identifiable assets acquired and liabilities
assumed and any non-controlling interest in the acquiree
4. Recognising and measuring goodwill or a gain on bargain purchase
? FVINA = fair value of identifiable net assets (incl. contingent liabilities)
– Recognise all identifiable assets acquired and liabilities assumed regardless
of the probability of inflows and outflows
– Therefore, certain contingent liabilities are included in FVINA
– Probability is dealt with in the measurement of FV
FVA
The subsidiary’s assets, liabilities and contingent liabilities at acquisition must be stated at
FV for the purposes of the consolidated financial statements
? A FV adjustment can be recorded in one of two ways:
1. The subsidiary records the revaluation in their own records
in ACCT3103 , this method is usually not available because of two reasons
– AASB 102 requires all inventory to be recorded at the lower of cost or NRV,
therefore any increase to FV of inventory cannot be made in the subsidiaries
books
– AASB 138 does not allow the subsidiary to recognise internally generated
goodwill
2. Record the fair value adjustment (“FVA”) on consolidation
? If the fair value of net assets > than the carrying amount of net assets
? This can apply to:
– Inventory
– PPE
– Investment property
– Financial Instruments
– Intangible assets
– Unrecognised identifiable intangible assets
– Employee benefits
– Contingent liabilities
Contingent Liabilities
– Therefore contingent liabilities where a present obligation exists
– But that do not qualify for recognition in the acquiree's books under AASB
137
– May be recognised by the acquirer as part of a business combination
– Possible obligations are not recognised in a business combination
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FVA Example
? On 1 July 2017, Poppy Ltd acquired all the shares in Sally Ltd for $400,000.
? At date of acquisition (DOA), Sally Ltd’s book value of net assets was represented by
Issued capital $300,000 and Retained earnings $50,000. However, the following
assets were determined to be undervalued:
1. Land held by Sally Ltd was undervalued by $10,000
2. A building held by Sally Ltd was undervalued by $45,000. The building had
originally cost $100,000 two (2) years ago and was being depreciated at 10% per
year.
3. A contingent liability relating to an unsettled legal claim with a fair value of $3,000
was disclosed in the notes to Sally’s financial statements.
? The tax rate is 30%
? Adjustment made on consolidation
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Impact of FVA: subsequent periods
3 Things to consider :
? Assets revalued on consolidation may be sold (example 1)
? Revalued asset require depreciation adjustments (example 2)
? Legal Claim is settled (example 3)
Example 1
If Non depreciable asset not sold in subsequent years:
If Non depreciable asset sold in current years:
If Non depreciable asset sold in prior years:
Example 2
? The building was revalued on consolidation at DOA
? A consequential depreciation adjustment (and its tax effect) is required in relation to
depreciable assets that are revalued to fair value on acquisition of a subsidiary
? Required as the subsidiary is continuing to depreciate the asset based on its cost,
which is lower than the fair value
? From a group perspective, the depreciation charge is understated
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Example 3
? On 1 July 2018 the legal claim was settled for $2,000
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Topic 4 Consolidation: Intra-group transactions
Intra-group transactions
x Intra-group transactions are transactions that occur between entities in the group,
Each separate legal entity records the transactions in their accounts
x The effects of such transactions will be included in the consolidated assets, liabilities,
equity, income and expenses when the separate financial statements are added
together
x These transactions must be eliminated/adjusted on consolidation
From a group viewpoint a transaction has not occurred with an entity outside of the
group (no external transaction)
There are generally 5 types of Intra-group transactions
1.Intra-group service
2 Intra-group Borrowing
3 intra-group inventory sale
4 intra-group PPE sale
5 intra-group dividends
1. Intra group services
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2 Intra-group borrowing with interest revenue and expenses
.
2 Intra-group Inventory sale
Adjust Closing Inventory
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Adjust Opening inventory
4 Intra-group PPE sale
y Consolidation adjustments if the intra-group transfer involves a depreciable asset:
o Reinstate accumulated depreciation written off by the seller at the date of the
internal sale.
o Adjust the initial gain on disposal and associated tax effect.
o Adjust the group’s depreciation expense and accumulated depreciation for all
reporting periods.
o Adjust the income tax effect arising from the depreciation adjustment.
Working Example:
Sub purchases machine for $100 on 1 July 2015
Depreciates asset at 10% per year
On 30 June 2016, Sub sold the machine to Parent for $150
The tax rate is 30%
In the year of the sale:
in the Year 2
Consolidation Notes
Step 2 FVA Entries
Subsequent years
Not sold If Sold – Current Year or Prior
years
Inventory or land
DR Asset
CR FVA（70%）
CR DTL （30%）
Inventory or land
DR RE Open Balance
CR Asset
DR Deferred Tax liabilities
CR RE Open Balance
If Accumulated Deprec(PPE-machine, plant,
equipment etc):
DR Accum. Deprec
CR Asset
DR Asset
CR DTL
CR FVA
If Depreciable Asset - following yrs:
DR Deprec Exp (current yr)
DR RE (Prior years)
CR Acc. Deprec
DR DTL
CR ITE (current yr)
CR RE (prior yrs)
PPE:
DR RE Open Balance
CR Asset
DR Deferred Tax liabilities
CR RE Open Balance
Alternative Method(一種合并的分
錄方法，不建議使用):
DR Gain on disposal of Asset
CR ITE
CR Retained Earning( Opening
bal)
Liabilities(contingent liabilities )
DR FVA
DR DTA
CR Contingent Liabilities
DR Contingent Liabilities
CR RE Open Balance
DR RE Open Balance
CR Deferred Tax Assets
Step 3 Pre-Acquisition Entries (adjust for transfers to/from RE or other reserves from Pre-Acq. Equity)
DR All Equity Accts (% Interest)-子公司的
equity 賬戶
DR FVA
DR Goodwill (Partial)
CR Gain on Bargain Purchase
CR Investment in Sub=consideration
DR All Equity Accts
DR FVA
DR Goodwill (Partial)
CR Gain on Bargain Purchase
CR Shares in Sub
(% Interest)
Step 4 NCI (Step 1 – Acq. Date)
DR All Equity Accts (% Interest)
DR FVA
CR NCI
Step 5 NCI (Step 2 – Acq. Date – Beg. Current period)
DR RE
CR NCI (increase)
Change in RE – Adjusted from Step 2 (% Interest)
DR ARR
CR NCI (increase)
Change in ARR (increase) (% Interest)
DR NCI (decrease)
CR FVA
Change in FVA due to sale of Asset prior year (% Interest)
Step 6 NCI (Step 3 – Current period)
DR NCI Share of Profit
CR NCI (increase)
Share of Current year profit – Adjusted from Step 2 (% Interest)
DR ARR
CR NCI (increase)
Change in ARR (increase) (% Interest)
DR Transf. from FVA **
CR FVA (% Interest)
(See Step 2 above – sale of asset
current year)
DR NCI (decrease)
CR Interim div paid
(% Interest)
DR NCI (decrease)
CR Final Div. Declared
(% Interest)
Step 7 Intragroup Dividends - Parent
年中
DR Div. Revenue
CR Interim Div Pd
(% Interest)
年未分紅
DR Div Payable
CR Final Div Declared
(% Interest)
年未分紅
DR Div Revenue
CR Div Receivable
(% Interest)
Step 8 – Intragroup Transactions
Sale Inv. – Current Year (Profit in
closing inventory)
Sale Inv. – Prior Year therefore
current yr sale (profit in opening
inventory)
Perpetual system
DR Sales
CR COS
CR Inventory
If period system
DR Sales
CR COGS-Purchase
DR COGS-Closing Inventory
CR Inventories
Perpetual system
DR RE (after tax profit)
DR ITE
CR COGS
If period system
DR RE (after tax profit)
DR ITE
CR COGS-Opening inventory
DR DTA(URP*30%)
CR ITE
If Upstream Sale (sub to parent)
If Upstream Sale (sub to parent)
DR NCI
CR NCI Share of profit
(after tax profit x Interest)
DR Share of profit
CR RE
(after tax profit x interest)
Sale NCA – Current Year Sale NCA – Prior Year
DR Proceeds/Gains on sale
CR Accumulated Depreciation
CR Asset
DR RE (after tax profit)
CR Accumulated Depreciation
CR Asset
DR DTA(Gains on sale x30%)
CR ITE
DR DTA(RE x30%)
CR RE
If Upstream Sale (sub to parent) DR
NCI
CR NCI Share of profit
(after tax profit x Interest)
If Upstream Sale (sub to parent)
DR NCI
CR RE
(after tax profit x interest)
Adjust depreciation
DR Acc. Deprec
CR Deprec. Expense
DR ITE
CR DTA
Adjust depreciation
DR Acc. Deprec.
CR RE(PY)
CR Deprec. Expense(CY)
DR ITE
DR RE
CR DTA
Borrowing/Loan/ Intra Group
service(management fee)
DR Borrowing/Interest/Management
Revenue
CR Borrowing/Interest/Management
Expenses
If the intragroup service/loan/interest
is not paid(如果題目中企業集團內
部發生的服務或者利息還未支付還
需要記錄下面分錄)
DR Interest/Management fee
Payable
CR Interest/Management fee
Receivable
Same as left
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Accounting For Corporate Structure
ACCT3103/ACCT7104
期中復習資料
Lecture 1+2
1. Acquisition of a Single Asset
y AASB 116 – PPE
y Measurement at initial recognition:
{ Measured at cost (fair value (FV) if no cost)
y Measurement after recognition:
{ Asset subject to depreciation and impairment
{ Measured by asset class using either:
Cost model (cost less any accumulated depreciation/accumulated impairment losses)
or,
Revaluation model
(FV less any subsequent accumulated depreciation/accumulated impairment losses.
Must be applied with sufficient regularity to avoid material variation from FV)
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2. Acquisition of a Collection of Assets ( Not a
Business) AASB 3 and AASB 116
3. Acquisition: Collection of Assets [direct business acquisition]
Direct Acquisition of a Business
y Determining whether a particular set of assets and activities is a business should be
based on whether the integrated set is capable of being conducted and managed as a
business by a market participant.
y Thus, in evaluating whether a particular set is a business, it is not relevant whether a
seller operated the set as a business or whether the acquirer intends to operate the set
as a business (AASB 3B.11)
y In the absence of evidence to the contrary, a particular set of assets and
activities in which goodwill(intangible) is present shall be presumed to be a
business. However, a business need not have goodwill.
y we must account for the acquisition in accordance with AASB 3 as a “business
combination”
y goodwill (an overpayment in excess of the fair value of a collection of assets)
y gain on bargain purchase (an underpayment)
4. Acquisition: Indirect Business acquisition (acquisition of shares in investee)
y AASB 3 distinguishes 2 types of acquisitions that result in business combinations:
Asset Fair Value
Plant 200,000
Land 150,000
Vehicles 175,000
Total FV of assets
acquired
$525,000
Purchase
consideration
$500,000
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{ Direct acquisition from a vendor of a collection of net assets that constitute a
business
{ Acquisition of sufficient equity (shares) to control the entity that owns
the business
1. Financial assets – no special business relationship between investor and investee
(ACCT3102)
y The important point for our purposes is that this type of equity investment does
not give rise to significant influence, joint control or control by the investor over
the investee.
2. Investments providing the power to exert control, joint control or significant influence
(ACCT3103)
y Significant influence
y joint control
y control
1.Significant Influence
y Significant influence is defined as:
“…the power to participate in the financial and operating policy decisions of the investee
but is not control or joint control over those policies.”
y Indicators of Significant Influence
o Representation on the investee’s Board or equivalent governing body
o Participation in policy-making processes, including decisions about dividends
and other distributions
o Material intra-entity transactions (economic dependency)
o Interchange of management personnel (organisational dependency)
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o Provision of essential technical information
(technological dependency)
y If the investor holds, directly or indirectly, 20% or more of the voting power of an
investee, it is presumed that the investor has significant influence, unless it can be
clearly demonstrated that this is not the case. At a holding of < 20%, directly or
indirectly, it is presumed that the investor does not hold significant influence, unless
such influence can be clearly demonstrated.
2.Joint Control
? Acquisitions that give the investor shared control of the investee’s economic
resources
? Joint Control is defined as:
“The contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities requires the unanimous consent of the
parties sharing the control.”
3.Control (!!!mid exam focus)
y Control is defined as :"An investor controls an investee when it is exposed, or has
rights, to variable returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee"
y An investor controls an investee if and only if the investor has all the following 必須
全部滿足
a)power over the investee;
b)exposure, or rights, to variable returns from its involvement with the
investee
c) the ability to use its power over the investee to affect the amount of the
investor’s returns
Financial reporting consequences of CONTROL
? If an investor entity controls an investee, then a parent- subsidiary relationship exists
? In combination, the investor entity and its subsidiary(s) form a group
? Where the group is a reporting entity, it must prepare
consolidated financial statements
? A statement of financial position
? A statement of profit or loss and other comprehensive income
? A statement of changes in equity
? A cash flow statement
? Notes
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Lecture 3
Consolidated financial reporting
? The objective of consolidated financial reporting is to show the operating
results and financial position of a group of business entities under common
control as if they were operating as a single entity controlled by the same
management
? Consolidation undoes this legal separation and focuses on reporting the results
of transactions between the group and external parties
Consolidation Process
? Consolidated financial statements are prepared by
(i) Aggregating (combining), line by line, like items of assets,
liabilities, equity, income and expenses
(i) Adjusting these combined figures for intra-group transactions between
entities within the group
? This line-item combining and adjusting of financial statements occurs on the
consolidation worksheet
? Important that you understand that consolidation is undertaken
periodically via the consolidation worksheet
? Consolidation does not involve adjustments in the general ledger accounts of
either the parent or the subsidiaries.
? Further, there is no consolidated general ledger or carried forward
consolidated balance.
? Consolidated financial statements are an additional set of financial
statements and are prepared via a consolidation worksheet.
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Consolidation: step one
? The first step in the consolidation process is to aggregate (add together) the line-by-
line items included in the financial statements of each entity in the group
? Entities in the group must have the same reporting period
? Where financial reporting periods are different they must be synchronised with 12
months of acquisition (s323D)
? Group entities must adopt uniform accounting methods
Consolidation: step two
1. Elimination of the parent’s investment in each subsidiary against the proportion of
the subsidiary’s equity acquired on acquisition date (AASB 10B:86(b)) (Topic 2 & 3)
2. Elimination of intra-group balances, transactions, income, expenses and dividends in
full (AASB 10B:86(c)) (Topic 4)
3. Identification and calculation of the non-controlling interest in the profit or loss for
the period, in the total comprehensive income for the period and in the net assets of
the consolidated subsidiaries (AASB 10B.94, AASB 101.81B) (Topic 5 & 6)
Consolidation: step three
The third step in the consolidation process is to transfer (post) the consolidation
adjusting entries to the consolidation worksheet and calculate the consolidated
(adjusted) balances for each item
Consolidation – step four
The last step in the consolidation process is to use the consolidated column on the
worksheet as the basis for the group financial statements
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1. Date of acquisition
Acquisition date is ‘… the date on which the acquirer obtains control of the acquiree’
(AASB 3:8)
y The date is determined on the substance of the transaction
y If the acquisition is made in a single transaction, the date of exchange is the
date the acquirer acquires the power to control
y If the acquisition is through a series of transactions, the date when the
investor achieves control is the date of acquisition
Determining the correct acquisition date is important as the following are affected by
the choice of acquisition date:
y It is a determinant of the fair value of the cost of acquisition
y It is a determinant of the fair value of the net assets of the
subsidiary at acquisition - termed pre-acquisition equity
y Thus it is a determinant of the income and changes in equity of the subsidiary
in the period subsequent to acquisition – termed post-acquisition equity
y Measurement of the non-controlling interest
2. Cost of an Investment in a Subsidiary
y The consideration (cost of acquisition) transferred in a business combination
shall be measured at fair value, which shall be calculated as
常出現的收購價（consideration） :
1. cash
2. PPE
3. Shares (需要注意考試的時候一定要用 DOA市場價格來算股票價
格)
4. Cash payable in future (***考試的時候要計算 Present value)
y the sum of the acquisition-date fair values of
{ the assets transferred by the acquirer,
{ the liabilities incurred or assumed by the acquirer to former owners of
the acquire; and
{ the equity interests issued by the acquirer
3. Acquisition-related Cost收購相關費用-不記錄到 consolidation
y Acquisition-related costs are costs the acquirer incurs to effect a business
combination. Those costs include finder's fees, advisory, legal, accounting,
valuation and other professional or consulting fees.
y The acquirer shall account for acquisition-related costs as expenses in the
periods in which the costs are incurred and the services are received, with one
exception.
If the cost of acquisition is > the equity acquired in the net assets of the subsidiary,
the difference is recognised as a measure of goodwill
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If the cost of acquisition is < the equity acquired in the net assets of the subsidiary,
the difference is recognised as a ‘gain on bargain purchase’
4. Cost of investment > equity acquired (goodwill)
y The excess is recognised as goodwill on consolidation (not in the accounts of the
acquirer Parent)
y The goodwill is attributable to relevant group cash generating units – not necessarily
attributable to subsidiary
y It is tested for impairment at least annually
y The impairment is recognised on consolidation
y There is no recognition of recovery of impairment losses
5. Intra-group dividends
y the parent entities must account for all dividends declared by a subsidiary after
acquisition date as dividend revenue regardless of whether distributed from pre-
acquisition or post-acquisition equities (AASB 127:12)
y Elimination of intra-group dividends is a common consolidation
adjustment
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Topic 3+4 Consolidation: Fair Value Adjustments & Tax Effects
Consolidation Process
Step 1
? Record parents and subsidiaries line-by-line financials on the consolidation
worksheet
? Line-by-line aggregation of the parent and subsidiaries accounts.
Step 2
? Acquisition analysis to determine goodwill or gain on bargain purchase
? Elimination of the parent’s investment in each subsidiary
? Elimination of intra-group transactions in full
? Identification & calculation of non-controlling interest (NCI)
Step3
? Post (transfer) consolidation adjusting entries to the consolidation worksheet
? Calculate balances
Step4
? Prepare group financial statements
Tax Consolidation
? Australian income tax law allows:
o A group to be treated as a single taxable entity under certain conditions
? Tax consolidation:
o Consolidated group is a head entity and its wholly owned, Australian entities that
qualify as subsidiary members under tax law
o Is not mandatory
o When a group chooses to be taxed on a consolidated basis:
Each of the entities in the tax consolidated group is treated as part of the parent company
and a single consolidated tax return is prepared
? Strict assumption in ACCT3103:
? That the tax consolidation regime was not adopted and therefore every
company is assumed to be a separate taxable entity.
? Tax adjustments relating to consolidation adjusting entries are made on
consolidation.
Rule of Thumb:
? If any consolidation journal/adjustment has an asset or a liability in it that is not
exactly contra’d by a different asset/liability, there will be a deferred tax effect on the
group accounts
Two exceptions
? Goodwill/accumulated impairment of goodwill (see section 3.3.4)
? intra-group dividends (exempted due to implicit assumption of fully franked dividends
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Acquisition analysis
1. Identifying the acquirer
2. Determining the acquisition date
3. Recognising and measuring the identifiable assets acquired and liabilities
assumed and any non-controlling interest in the acquiree
4. Recognising and measuring goodwill or a gain on bargain purchase
? FVINA = fair value of identifiable net assets (incl. contingent liabilities)
– Recognise all identifiable assets acquired and liabilities assumed regardless
of the probability of inflows and outflows
– Therefore, certain contingent liabilities are included in FVINA
– Probability is dealt with in the measurement of FV
FVA
The subsidiary’s assets, liabilities and contingent liabilities at acquisition must be stated at
FV for the purposes of the consolidated financial statements
? A FV adjustment can be recorded in one of two ways:
1. The subsidiary records the revaluation in their own records
in ACCT3103 , this method is usually not available because of two reasons
– AASB 102 requires all inventory to be recorded at the lower of cost or NRV,
therefore any increase to FV of inventory cannot be made in the subsidiaries
books
– AASB 138 does not allow the subsidiary to recognise internally generated
goodwill
2. Record the fair value adjustment (“FVA”) on consolidation
? If the fair value of net assets > than the carrying amount of net assets
? This can apply to:
– Inventory
– PPE
– Investment property
– Financial Instruments
– Intangible assets
– Unrecognised identifiable intangible assets
– Employee benefits
– Contingent liabilities
Contingent Liabilities
– Therefore contingent liabilities where a present obligation exists
– But that do not qualify for recognition in the acquiree's books under AASB
137
– May be recognised by the acquirer as part of a business combination
– Possible obligations are not recognised in a business combination
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FVA Example
? On 1 July 2017, Poppy Ltd acquired all the shares in Sally Ltd for $400,000.
? At date of acquisition (DOA), Sally Ltd’s book value of net assets was represented by
Issued capital $300,000 and Retained earnings $50,000. However, the following
assets were determined to be undervalued:
1. Land held by Sally Ltd was undervalued by $10,000
2. A building held by Sally Ltd was undervalued by $45,000. The building had
originally cost $100,000 two (2) years ago and was being depreciated at 10% per
year.
3. A contingent liability relating to an unsettled legal claim with a fair value of $3,000
was disclosed in the notes to Sally’s financial statements.
? The tax rate is 30%
? Adjustment made on consolidation
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Impact of FVA: subsequent periods
3 Things to consider :
? Assets revalued on consolidation may be sold (example 1)
? Revalued asset require depreciation adjustments (example 2)
? Legal Claim is settled (example 3)
Example 1
If Non depreciable asset not sold in subsequent years:
If Non depreciable asset sold in current years:
If Non depreciable asset sold in prior years:
Example 2
? The building was revalued on consolidation at DOA
? A consequential depreciation adjustment (and its tax effect) is required in relation to
depreciable assets that are revalued to fair value on acquisition of a subsidiary
? Required as the subsidiary is continuing to depreciate the asset based on its cost,
which is lower than the fair value
? From a group perspective, the depreciation charge is understated
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Example 3
? On 1 July 2018 the legal claim was settled for $2,000
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Topic 4 Consolidation: Intra-group transactions
Intra-group transactions
x Intra-group transactions are transactions that occur between entities in the group,
Each separate legal entity records the transactions in their accounts
x The effects of such transactions will be included in the consolidated assets, liabilities,
equity, income and expenses when the separate financial statements are added
together
x These transactions must be eliminated/adjusted on consolidation
From a group viewpoint a transaction has not occurred with an entity outside of the
group (no external transaction)
There are generally 5 types of Intra-group transactions
1.Intra-group service
2 Intra-group Borrowing
3 intra-group inventory sale
4 intra-group PPE sale
5 intra-group dividends
1. Intra group services
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2 Intra-group borrowing with interest revenue and expenses
.
2 Intra-group Inventory sale
Adjust Closing Inventory
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Adjust Opening inventory
4 Intra-group PPE sale
y Consolidation adjustments if the intra-group transfer involves a depreciable asset:
o Reinstate accumulated depreciation written off by the seller at the date of the
internal sale.
o Adjust the initial gain on disposal and associated tax effect.
o Adjust the group’s depreciation expense and accumulated depreciation for all
reporting periods.
o Adjust the income tax effect arising from the depreciation adjustment.
Working Example:
Sub purchases machine for $100 on 1 July 2015
Depreciates asset at 10% per year
On 30 June 2016, Sub sold the machine to Parent for $150
The tax rate is 30%
In the year of the sale:
in the Year 2
Consolidation Notes
Step 2 FVA Entries
Subsequent years
Not sold If Sold – Current Year or Prior
years
Inventory or land
DR Asset
CR FVA（70%）
CR DTL （30%）
Inventory or land
DR RE Open Balance
CR Asset
DR Deferred Tax liabilities
CR RE Open Balance
If Accumulated Deprec(PPE-machine, plant,
equipment etc):
DR Accum. Deprec
CR Asset
DR Asset
CR DTL
CR FVA
If Depreciable Asset - following yrs:
DR Deprec Exp (current yr)
DR RE (Prior years)
CR Acc. Deprec
DR DTL
CR ITE (current yr)
CR RE (prior yrs)
PPE:
DR RE Open Balance
CR Asset
DR Deferred Tax liabilities
CR RE Open Balance
Alternative Method(一種合并的分
錄方法，不建議使用):
DR Gain on disposal of Asset
CR ITE
CR Retained Earning( Opening
bal)
Liabilities(contingent liabilities )
DR FVA
DR DTA
CR Contingent Liabilities
DR Contingent Liabilities
CR RE Open Balance
DR RE Open Balance
CR Deferred Tax Assets
Step 3 Pre-Acquisition Entries (adjust for transfers to/from RE or other reserves from Pre-Acq. Equity)
DR All Equity Accts (% Interest)-子公司的
equity 賬戶
DR FVA
DR Goodwill (Partial)
CR Gain on Bargain Purchase
CR Investment in Sub=consideration
DR All Equity Accts
DR FVA
DR Goodwill (Partial)
CR Gain on Bargain Purchase
CR Shares in Sub
(% Interest)
Step 4 NCI (Step 1 – Acq. Date)
DR All Equity Accts (% Interest)
DR FVA
CR NCI
Step 5 NCI (Step 2 – Acq. Date – Beg. Current period)
DR RE
CR NCI (increase)
Change in RE – Adjusted from Step 2 (% Interest)
DR ARR
CR NCI (increase)
Change in ARR (increase) (% Interest)
DR NCI (decrease)
CR FVA
Change in FVA due to sale of Asset prior year (% Interest)
Step 6 NCI (Step 3 – Current period)
DR NCI Share of Profit
CR NCI (increase)
Share of Current year profit – Adjusted from Step 2 (% Interest)
DR ARR
CR NCI (increase)
Change in ARR (increase) (% Interest)
DR Transf. from FVA **
CR FVA (% Interest)
(See Step 2 above – sale of asset
current year)
DR NCI (decrease)
CR Interim div paid
(% Interest)
DR NCI (decrease)
CR Final Div. Declared
(% Interest)
Step 7 Intragroup Dividends - Parent
年中
DR Div. Revenue
CR Interim Div Pd
(% Interest)
年未分紅
DR Div Payable
CR Final Div Declared
(% Interest)
年未分紅
DR Div Revenue
CR Div Receivable
(% Interest)
Step 8 – Intragroup Transactions
Sale Inv. – Current Year (Profit in
closing inventory)
Sale Inv. – Prior Year therefore
current yr sale (profit in opening
inventory)
Perpetual system
DR Sales
CR COS
CR Inventory
If period system
DR Sales
CR COGS-Purchase
DR COGS-Closing Inventory
CR Inventories
Perpetual system
DR RE (after tax profit)
DR ITE
CR COGS
If period system
DR RE (after tax profit)
DR ITE
CR COGS-Opening inventory
DR DTA(URP*30%)
CR ITE
If Upstream Sale (sub to parent)
If Upstream Sale (sub to parent)
DR NCI
CR NCI Share of profit
(after tax profit x Interest)
DR Share of profit
CR RE
(after tax profit x interest)
Sale NCA – Current Year Sale NCA – Prior Year
DR Proceeds/Gains on sale
CR Accumulated Depreciation
CR Asset
DR RE (after tax profit)
CR Accumulated Depreciation
CR Asset
DR DTA(Gains on sale x30%)
CR ITE
DR DTA(RE x30%)
CR RE
If Upstream Sale (sub to parent) DR
NCI
CR NCI Share of profit
(after tax profit x Interest)
If Upstream Sale (sub to parent)
DR NCI
CR RE
(after tax profit x interest)
Adjust depreciation
DR Acc. Deprec
CR Deprec. Expense
DR ITE
CR DTA
Adjust depreciation
DR Acc. Deprec.
CR RE(PY)
CR Deprec. Expense(CY)
DR ITE
DR RE
CR DTA
Borrowing/Loan/ Intra Group
service(management fee)
DR Borrowing/Interest/Management
Revenue
CR Borrowing/Interest/Management
Expenses
If the intragroup service/loan/interest
is not paid(如果題目中企業集團內
部發生的服務或者利息還未支付還
需要記錄下面分錄)
DR Interest/Management fee
Payable
CR Interest/Management fee
Receivable
Same as left
