Advanced financial accounting - Lecture 37: Group accounts. The main topics covered in this chapter include: control; consolidated accounts; consolidated balance-sheet; consolidated income statement; owner’s equity; current liabilities; current assets;... Please refer to the lecture for details!
Advanced Financial Accounting Lec-37 Group Accounts Control Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities Control The parent company has owned more than 50% of subsidiary company (Each ordinary share capital has one voting right) The parent company has power over more than 50% of the voting rights of subsidiary company by virtue of agreement with other shareholders of it The parent company has power to govern the financial and operating policies of subsidiary company by statute or under an agreement The parent company has power to appoint or remove a majority of the directors of subsidiary company The parent company has power to cast the majority of votes at meetings of the board of directors of subsidiary company Consolidated Accounts Consolidated balance-sheet Consolidated income statement Assets = Owner’s equity + Liabilities Owner’s Equity Share capital Reserves Assets Current assets Non current assets Liabilities Current liabilities Non current liabilities Question Balance sheet As on 31 Dec 2008 P (Rs) S (Rs) Fixed assets 1,000 400 Investment in S 500 Current assets 400 200 Total Assets 600 1,900 Share capital 300 1,200 Reserves 500 200 Current liabilities 200 100 1,900 600 Total liabilities & capital Question The parent Co (P) acquired 100% shares of the subsidiary Co (S) on 31st December 2008 Required: Prepare the Consolidated Balance Sheet as on the same date Solution Consolidated Balance Sheet As at December 2008 (Rs) Fixed assets Current assets 1,400 600 Total assets 2,000 Share capital 1,200 Reserves 500 Current liabilities 300 Total liabilities & capital 2,000 Question Balance Sheet As on 31st December 2008 P (Rs) Fixed assets S (Rs) 1,000 400 Investment in S 500 current assets 400 200 Total Assets 1,900 600 Share capital 1,200 300 Reserves 500 150 Current liabilities 200 150 1,900 600 Total liabilities & capital The parent Co (P) acquired 100% shares of the subsidiary Co (S) on 31st December 2008 Required: Prepare the Consolidated Balance Sheet as on the same date Solution Consolidated Balance Sheet As at December 2008 (Rs) Fixed assets Goodwill Current Assets 1,400 50 600 Total assets 2,050 Share capital 1,200 Reserves 500 Current liabilities 350 Total liabilities & capital 2,050 Goodwill Cost of investment Net assets of S Co Acquired Goodwill 500 (450) 50 .. .Group Accounts Control Control is the power to govern the financial and operating policies of an entity so as to obtain benefits... of votes at meetings of the board of directors of subsidiary company Consolidated Accounts Consolidated balance-sheet Consolidated income statement Assets = Owner’s equity + Liabilities Owner’s... by virtue of agreement with other shareholders of it The parent company has power to govern the financial and operating policies of subsidiary company by statute or under an agreement The parent