1 Groups and consolidation: an overview

 
445 
1.1 Example: consolidated statement of profit or loss
P Co acquired 75% of the ordinary shares of S Co on that company's incorporation in 20X3. The 
summarised statements of profit or loss of the two companies for the year ending 31 December 20X6 are 
set out below. 
P Co 
S Co 
$ 
$
Revenue 
75,000 
38,000 
Cost of sales 
30,000 
20,000 
Gross profit 
45,000 
18,000 
Administrative expenses 
14,000 
8,000 
Profit before taxation 
31,000 
10,000 
Income taxes 
10,000 
2,000 
Profit for the year 
21,000 
8,000 
Note: Movement on retained earnings
Retained earnings brought forward 
87,000 
17,000 
Profit for the year 
21,000 
8,000 
Retained earnings carried forward 
108,000 
25,000 
Required
Prepare the consolidated statement of profit or loss and movement on retained earnings for the group. 
Solution 
P CO 
CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 20X6 
$
Revenue (75 + 38) 
113,000 
Cost of sales (30 + 20) 
50,000 
Gross profit 
63,000 
Administrative expenses (14 + 8) 
22,000 
Profit before taxation 
41,000 
Income taxes (10 + 2) 
12,000 
Profit for the year 
29,000 
Profit attributable to: 
Owners of the parent (bal. fig.) 
27,000 
Non-controlling interest (25% 

8) 
2,000 
29,000 
Movement on retained earnings 
Group profit for year 
27,000 
Retained earnings brought forward (87 + (17 

75%)) 
99,750 
Retained earnings carried forward 
126,750 
Notice how the non-controlling interest (NCI) is dealt with. 
(a) 
Down to the line