Consolidation Accounting: A Comprehensive Guide to BCVR Entries, Pre-Acquisition Adjustments, and NCI
Posted on May 7, 2024 in Economy
Consolidation Notes
Step 2: BCVR Entries
| Not Sold | If Sold – Current Year | If Sold – Prior Year |
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| DR Asset | Inventory: | No entry here – BCVR transferred to RE (Step 3) |
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| CR BCVR | DR COGS | |
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| CR DTL | CR ITE | |
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| | CR Transf. from BCVR** | |
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| If Accumulated Deprec: | DR Accum. Deprec | NCA: | No entry here – BCVR transferred to RE (Step 3) |
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| CR Asset | DR CA of Asset | |
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| CR DTL | CR ITE | |
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| CR BCVR | CR Transfer from BCVR** | |
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| If Depreciable Asset – following yrs: | DR Deprec Exp (current yr) | | |
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| DR RE (Prior years) | | |
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| CR Acc. Deprec | | |
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| DR DTL | | |
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| CR ITE (current yr) | | |
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| CR RE (prior yrs) | | |
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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 |
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| DR BCVR | DR BCVR | DR Equity Accts |
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| DR Goodwill (Partial) or | DR Goodwill (Partial) or | DR BCVR |
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| CR Gain on Bargain Purchase | CR Gain on Bargain Purchase | DR Goodwill (Partial) or |
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| CR Shares in Sub | CR Shares in Sub | CR Gain on Bargain Purchase |
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| | (% Interest) | CR Shares in Sub |
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| | | (% Interest) |
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| | DR Transf. from BCVR ** CR BCVR (% Interest) | |
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Step 4: NCI (Step 1 – Acq. Date)
| DR All Equity Accts (% Interest) DR BCVR | | |
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| CR NCI | | |
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Step 5: NCI (Step 2 – Acq. Date – Beg. Current period)
Change in RE – may need to be adjusted from Step 2 BCVR entries if adj to RE (% Interest)
| DR ARS/GR OCI | | |
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| CR NCI (increase) | | |
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Change in ARS/GR (increase) (% Interest)
Change in BCVR due to sale of Asset prior year (% Interest)
Step 6: NCI (Step 3 – Current period)
| DR NCI Share of Profit | | |
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| CR NCI (increase) | | |
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Share of Current year profit – may need to be adjusted from Step 2 BCVR entries if adj to profit (% Interest)
Change in ARS (increase) (% Interest)
| DR Transf. from BCVR** CR BCVR (% Interest) | |
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(See Step 2 above – sale of asset current year)
| DR NCI (decrease) | | |
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| CR Interim div paid (% Interest) | | |
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| DR NCI (decrease) | | |
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| CR Final Div. Declared (% Interest) | | |
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Step 7: Dividends – Parent
| DR Div. Revenue | | |
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| CR Interim Div Pd (% Interest) | | |
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| DR Div Payable | | |
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| CR Final Div Declared (% Interest) | | |
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| DR Div Revenue | | |
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| CR Div Receivable (% Interest) | | |
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Step 8 – Intragroup Transactions
| Sale Inv. – Current Year (Profit in closing inventory) | Sale Inv. – Prior Year |
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| DR Sales | DR RE (after tax profit) |
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| CR COS | DR ITE |
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| CR Inventory | CR COS (profit) |
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| DR DTA | If Upstream Sale (sub to parent) |
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| CR ITE | DR Share of profit |
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| If Upstream Sale (sub to parent) | CR RE |
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| DR NCI | (after tax profit x interest) |
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| CR NCI Share of profit | |
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| (after tax profit x Interest) | |
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| Sale NCA – Current Year | Sale NCA – Prior Year |
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| DR Proceeds on sale | DR RE (after tax profit) |
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| CR CA of asset | DR DTA |
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| CR Asset | CR Asset |
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| DR DTA | |
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| CR ITE | If Upstream Sale (sub to parent) |
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| If Upstream Sale (sub to parent) | DR NCI |
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| DR NCI | CR RE |
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| CR NCI Share of profit | (after tax profit x interest) |
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| (after tax profit x Interest) | |
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| Adjust depreciation | Adjust depreciation |
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| DR Acc. Deprec | DR Acc. Deprec. |
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| CR Deprec. Expense | CR RE |
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| | CR Deprec. Expense |
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| DR ITE | |
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| CR DTA | DR ITE |
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| | DR RE |
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| | CR DTA |
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| Adjust NCI – realising profit | Adjust NCI – realising profit |
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| DR Share of profit | DR Share of Profit |
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| CR NCI | DR RE |
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| (Deprec after tax x interest) | CR NCI |
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| | (Deprec after tax x interest) |
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Foreign Currency Translation
| Item | Translation to functional currency | Translation to presentation currency | Differences |
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Assets and Liabilities:
(a) Monetary items (cash, account rec, account payable, notes)
(b) Non-Monetary items (property, plant equity, goodwill | (a) Exchange rate current at reporting date
(b) Exchange rate at date of acquisition or revaluation (historic rate) | (a) & (b) Exchange rate current at reporting date | Exchange rates for non-monetary items |
Pre-acquisition Shareholders’ Equity
pre-acquisition equity, share capital, reserve | 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 resulting from internal transfer, bonus share dividend | movement resulting 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
dividend | 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 |
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| Income and Expense items (except allocations of non-monetary items such as depreciation) Sales, Cost of Sales, Expense, Tax expense, RE, depreciation | 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 |
| 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 |
