Consolidation Accounting: A Comprehensive Guide
Consolidation Notes
Step 2 BCVR Entries
| Not sold | If Sold – Current Year | If Sold – Prior Year | ||||||
|---|---|---|---|---|---|---|---|---|
| DR Asset | CR BCVR | CR DTL | Inventory: | DR COGS | CR ITE | No entry here – BCVR | ||
| CR BCVR | DR Accum.D(Cost –Carry Amount) | CR Asset | NCA: | DR CA ofAsset CR ITE | CR Transfer from BCVR** | transferred to RE (Step 3) | ||
| CR DTL | CR Asset | CR DTL CR BCVR | If Impairment | DR Retained Earnings | Cr Accum impairment brands | No entry here – BCVR transferred to RE (Step 3) | ||
| Deferred taxed Liability | Retained earnings (30%) | |||||||
| DR Deprec Exp (current yr) DR RE (Prior years) | CR Acc.Deprec | |||||||
| DR DTL | CR ITE (currentyr) CR RE (prioryrs) | |||||||
Step 3 Pre-Acquisition Entries (adjust for transfers to/from RE or other reserves from Pre-Acq. Equity)
| DR All Equity Accts (% Interest) | DR All Equity Accts | DR RE (add BCVR from above |
|---|---|---|
| DR BCVR | DR BCVR | DR Equity Accts (goodwill will go to RE if impairment exist |
| DR Goodwill (Partial) or | DR Goodwill (Partial) or | DR BCVR |
| CR Gain on BargainPurchase | CR Gain on BargainPurchase | DR Goodwill (Partial) or |
| CR Shares inSub | CR Shares inSub | CR Gain on BargainPurchase |
| (% Interest) | CR Shares inSub | |
| (% Interest) | ||
| DR Transf. from BCVR ** CR BCVR (%Interest) | Dr Transfer from ARS |
Step 4 NCI (Step 1 – Acq. Date)
| DR All Equity Accts (% Interest) DR BCVR | CR NCI |
|---|
Step 5 NCI (Step 2 – Acq. Date – Beg. Current period)
| DR RE (Does not calculate transfer) calculate from begins to mid | CR NCI (increase) |
|---|
Change in RE – may need to be adjusted from Step 2 BCVR entries if adj to RE (% Interest)
| DR ARS/GR/OCI (Compare last year finance with this year | CR NCI (increase) | |
|---|---|---|
| DR NCI (decrease) | CR BCVR |
Step 6 NCI (Step 3 – Current period)
| DR NCI Share of Profit CR NCI (increase) |
|---|
Share of Current year profit – may need to be adjusted from Step 2 BCVR entries if adj to profit (% Interest)
| DR ARS (additional info) | CR NCI(increase) | |
|---|---|---|
| Change in ARS (increase) (% Interest) | ||
| Change in General reserve (if Transfer financial info) | ||
| Dr GR (Financial information) | Cr Transfer to GR | DR Transf. from BCVR** CR BCVR (%Interest) |
| (See Step 2 above – sale of asset current year) | ||
|---|---|---|
| DR NCI (decrease) CR Interim divpaid (%Interest) | ||
| DR NCI (decrease) | CR Final Div.Declared (%Interest) |
Step 7 Dividends – Parent
| DR Div. Revenue CR Interim DivPd (%Interest) | ||
|---|---|---|
| DR Div Payable | CR Final DivDeclared (%Interest) | |
| DR Div Revenue | CR Div Receivable (%Interest) |
Step 8 – Intragroup Transactions
Sale Inv. – Current Year (Profit in closing inventory)
Sale Inv. – Prior Year
DR Sales CR COS
CR Inventory
DR RE (after tax profit) DR ITE
CR COS (profit)
DR DTA CR ITE
If Upstream Sale (sub to parent)
If Upstream Sale (sub to parent)
DR Share of profit
DR NCI
CR RE
CR NCI Share of profit
(after tax profit x interest)
(after tax profit x Interest)
Sale NCA – Current Year
Sale NCA – Prior Year
DR Proceeds onsale CR CA of asset CR Asset
DR RE (after tax profit) DR DTA
CR Asset
DR DTA CR ITE
If Upstream Sale (sub to parent)
If Upstream Sale (sub to
DR NCI
parent)
CR NCI Share of profit
DR NCI
(after tax profit x Interest)
CR RE
(after tax profit x interest)
Adjust depreciation
Adjust depreciation
DR Acc. Deprec
DR Acc. Deprec.
CR Deprec. Expense
CR RE
CR Deprec. Expense
DR ITE
CR DTA
DR ITE
DR RE
CR DTA
Adjust NCI – realising profit
Adjust NCI – realising profit
DR Share of profit
DR Share of Profit
CR NCI
DR RE
(Deprec after tax x interest)
CR NCI
(Deprec after tax x interest)
Item | Translation to functional currency | Translation to presentation currency | Differences |
Assets and Liabilities: (a)Monetaryitems (current assets,cash, accounts payable, notes) (b)Non-Monetaryitems (property, plant, equipment, goodwill, land | (a)Exchange rate currentat reportingdate (b)Exchange rate at dateof acquisition or revaluation (historicrate) | (a) & (b) Exchange rate current at reporting date | Exchange rates for non-monetary items |
Pre-acquisition Shareholders’ Equity Share capital, GR, | Exchange rate at date of acquisition or investment | Exchange rate at date of acquisition or investment | Nil |
Post-acquisition movements in Shareholders’ Equity (except retained profits) movement from internal transfer | Exchange rate current at the date of recognition in the accounts | Exchange rate current at the date of recognition in the accounts | Nil |
Post-acquisition Dividends | Exchange rate current at date paid or declared | Exchange rate current at date paid or declared | Nil |
Item | Translation to functional currency | Translation to presentation currency | Differences |
Income and Expense items (except allocations of non- monetary items such as depreciation) sales, cost of sales, expense, tax expense, RE, depreciation exp | Exchange rate current at the dates items recognised in the accounts (or average exchange rate for year) | Exchange rate current at the dates items recognised in the accounts (or average exchange rate for year) | Nil RE calc (RE 2015 300,00×0.85) Profit 2015-16 increase 100,00 (400,000) x0.82 av 2015-16 =82,000 Profit 2016-17 (50,000) 450,000×0.88=xx Add them all to find RE |
Allocations of Non-Monetary items (depreciation, amortisation) | Exchange rate used to translate related non-monetary items (historic rate) | As above | Exchange rates for allocations of non- monetary items |
Exchange Differences (gains or losses) | Foreign exchange gain/loss (Income Statement) | Foreign currency translation reserve (Balance Sheet) | Either recognised in the Income Statement or in equity in the Balance Sheet |
+The rules for determining which segments are reportable segments are found in AASB 8.13-19. These requirements, summarised on pages 946–947, are reproduced below: 1 A segment must be classified as a reportable segment if any of the following conditions is satisfied: (a) its reported revenue – including both sales to external customers and inter-segment sales or transfers – is 10% or more of the combined revenue (internal and external) of all operating segments; or (b) the absolute amount of its reported profit or loss is 10% or more of the greater of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported losses of all operating segments reporting a loss; or (c) its assets are 10% or more of total assets for all operating segments (AASB 8.13). 2 If ‘total external revenues reported by the operating segments’ constitutes less than 75% of the ‘entity’s revenue’, additional reportable segments must be identified, even though they do not meet the test in 1 above, until at least 75% of the entity’s revenue is included in the reportable segments (AASB 8.15). 3 Internally reported segments that are ‘substantially similar’, that is they meet the requirements of AASB 8.12 discussed above, may be combined (AASB 8.14). 4 An internally reported segment that is not classified as reportable under 1 above is treated in one of three ways: (a) it is designated as reportable despite its size because management believes information about the segment will be useful to users (AASB 8.13); or (b) it is combined, in accordance with 3 above, into a separately reportable segment with one or more ‘substantially similar’ segments that do not satisfy 1; or (c) information about other non-reportable segments and that relating to other business activities are combined and reported as ‘all other segments’ and is distinguished from the items in the reconciliation required by AASB 8.28 (AASB 8.16). 5 If the management judges that an operating segment that was a reportable segment in the prior reporting period ‘is of continuing significance’, information about that segment must be reported separately in the current period. Despite test 1 not being satisfied it must be classified as a reportable segment in the current reporting period (AASB 8.17). If, in the current reporting period, a segment is now reportable under 1, prior-period segment data are restated to reflect this newly reportable segment, unless it is impracticable to do so (AASB 8.18)