I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 

 

438

 

ANSWER 

Singe Co has made a profit of $24,000 ($39,000 – $15,000) for the year. This is assumed to have 

arisen evenly over the year; $6,000 in the 3 months to 31 March and $18,000 in the 9 months after 

acquisition. The company's pre-acquisition retained earnings are therefore as follows. 

 

$    

Balance at 31 December 20X4 

 

15,000 

Profit for three months to 31 March 20X5 (

3

/

12 

 24,000)  

 

  6,000 

Pre-acquisition retained earnings 

 

21,000 

The balance of $4,000 on the revaluation surplus is all pre-acquisition. 

HINGE CO 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X5 

 

 

$ 

 

$ 

Assets 

 

Non-current assets 

 

   

Property, plant and equipment (32,000 + 30,000) 

  

62,000 

   

Goodwill (W1) 

  

22,000 

 

 

84,000

Current assets (85,000 + 43,000) 

 

  

128,000

Total assets 

 

  

212,000

Equity and liabilities 

 

Equity attributable to owners of the parent 

 

Ordinary shares of $1 each 

  

100,000 

Revaluation surplus (W3) 

  

7,000 

Retained earnings (W2) 

  

  54,400 

 

 

  

161,400

NCI (W4) 

 

  

  10,600

Total equity 

 

  

172,000

Current liabilities (20,000 + 20,000) 

 

  

  40,000

Total equity and liabilities 

 

  

212,000

Workings 

1 

Goodwill 

 

 

$ 

 

$    

Fair value of consideration transferred 

 

  

50,000 

Fair value of NCI  

 

 

  7,000 

 

 

 

Less net acquisition-date fair value of identifiable assets acquired 

and liabilities assumed: 

 

 

 

Ordinary share capital 

  

10,000 

 

 

Retained earnings at acquisition (as above) 

  

21,000 

 

 Revaluation 

surplus 

  

  4,000 

 

 

 

 

(35,000) 

Goodwill 

 

  

 22,000 

2 

Retained earnings 

 

  

Hinge Co 

   

Singe Co 

 

 

$  

 

$    

Per question 

   

40,000 

39,000 

Pre-acquisition retained earnings (W2) 

 

 (21,000) 

 

 

  18,000 

Group share of post-acquisition retained earnings 

Singe Co: $18,000  80% 

   

 

14,400

 

 

 

   

54,400 

 

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CHAPTER 24  

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  THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

 

439 

3 Revaluation 

surplus 

 

 

$ 

Hinge Co 

      

7,000 

Group share of post-acquisition revaluation surplus: Singe Co 

      

       – 

 

      

7,000 

4 

NCI at reporting date 

 

 

$ 

Fair value of NCI at acquisition date 

      7,000 

NCI share of post-acquisition retained earnings (20%  18,000)  

    

  3,600 

NCI 

 1 

10,600 

 

 

6

   Summary: consolidated statement of financial position 

Purpose 

To show the net assets which parent controls and the ownership of those assets 

Net assets 

Always 100% parent plus 100% subsidiary 

Share capital 

Parent only 

Reason 

Simply reporting to the parent company's shareholders in another form 

Retained 

earnings 

100% parent plus group share of post-acquisition retained earnings of subsidiary less 

consolidation adjustments 

Reason 

To show the extent to which the group actually owns total assets less liabilities 

Non-controlling 

interest 

Fair value at acquisition plus share of post-acquisition retained earnings and other 

resources 

Reason 

To show the equity in a subsidiary not attributable to the parent 

 

 

 EXAM FOCUS POINT 

 

Your FFA exam is a CBE, so you will not have to set out a full pro-forma as you would in a paper 

based exam. 

 

You will be given the financial statements and additional information as above and you will then 

complete the consolidated statements by way of separate tasks. 

 

For each of these tasks, such as goodwill on acquisition or NCI, you will be given a pro-forma to 

complete. 

 

You will not be required to show workings. 

 

However, learning to complete a full statement as above with correct workings is very good 

practice both for your exam and for later papers. 

 

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