19 - Changes in group structure

Question 1

What are Mid-year acquisitions and how do we account for that?

Answer 1

Parent gaisn control part way through the year and we have to account for this my prorating everything on the P&L but we don’t prorate assets or liabilities, we do have to prorate profit to the retained earnings.

Question 2

what is a step acquisition?

Answer 2

At the acquisition date we recalculate fair value of shares. Calculate goodwill.
consolidate accounst from that date.

Question 3

What to do when calculating goodwill after a step acquisition

Answer 3

we take the consideration + FV of previous share capital.

Question 4

How to treat Disposal in consolidated financial statements.

Answer 4

We recognise the remaining shares at fair value.
Consoldiate up to disposal date
Derecognise the subsidary and account for profit or loss on disposal.

Question 5

How to present the disposal in the consolidated financial statement.

Answer 5

Is the disposal a discontinued operation? It is a material part of the business by either operation or geographic.
We do the normal P&L and then below profit for the year we add discontinued operations, and we add the gain or loss on disposal. Don’t forget NCI up to disposal date.

Question 6

how to account for increasing or decreasing our shareholding but not losing control?

Answer 6

We don’t amend the goodwill, We calculate goodwill when we gain control only.
We account for this by changing the NCI in equity. We dr/cr NCI then DR/Cr Cash and the balancing figure goes to the retained earnings. This called a step adjustment, Not a gain or loss. Examiner wants us to say Step adjustment.

Question 7

What is the proprotionate method?

Answer 7

we take the % increase to NCI X Net assets of sub

Question 8

What is the Fair value method?

Answer 8

we take the % increase to NCI X (Net assets + Goodwill) .

Question 9

How to calculate profit or loss on disposal of shares?

Answer 9

Proceeds + Fair value of remaining shares - Goodwill at disposal - Net assets at disposal + NCI at disposal.

Question 10

How to account for control to control?

Answer 10

This is a step adjustment and we do not recalculate goodwill or account for a gains or losses.
We account by CR cash and DR NCI if the share holding is going up and DR cash and CR NCI if the share holding is decreasing.