1 Groups and consolidation: an overview

PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 
 
450
 
Working 
Intra-group sale 
$
Sale price
100% 25,000 
Cost price
80% 
(20,000) 
Gross profit
20% 5,000 
Unrealised profit
5,000 
* Because the sale was made from the parent, Percy, to the subsidiary, Mercy, there is no unrealised 
profit attributable to the NCI.
 
 
3
Acquisitions part way through the year 
If a subsidiary is acquired during the year, only the post-acquisition element of the statement of profit or 
loss balances is included on consolidation.
We have seen in the last chapter that retained earnings in the consolidated statement of financial 
position comprise: 
(a) 
The whole of the parent company's retained earnings 
(b) The 
group's share of post-acquisition retained earnings 
in the subsidiary
From the total retained earnings of the subsidiary we must therefore 
exclude 
both the 
NCI's share 
of total 
retained earnings and the 
group's share of pre-acquisition 
retained earnings. 
A 
similar procedure is necessary in the consolidated statement of profit or loss 
if it is to link up with the 
consolidated statement of financial position.
As we have seen in the last chapter, if the subsidiary is 
acquired part way through the accounting year
, 
it is necessary to split the profits earned between those earned pre-acquisition and those earned post-
acquisition.
So we must first split the entire statement of profit or loss of the subsidiary between pre-acquisition and 
post-acquisition proportions. Only the post-acquisition figures are included in the consolidated statement 
of profit or loss. Try the following question.