1 Groups and consolidation: an overview

 EXAM FOCUS POINT 
A past exam included a question on the consolidated statement of profit or loss where a subsidiary was 
acquired part way through the year. It was one of the three questions with the lowest pass rates on the 
exam, so make sure that you understand the answer to the following question. 
BPP Tutor Toolkit Copy

---

CHAPTER 25
//
THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
 
451 
QUESTION 
Acquisition part way through the year
 
P Co acquired 60% of the equity of S Co on 1 April 20X5. The statements of profit or loss of the two 
companies for the year ended 31 December 20X5 are set out below. 
P Co
S Co
S Co 
(
9
/
12
)
 
$
$
$
Revenue 
170,000 
80,000 
60,000 
Cost of sales 
65,000 
36,000
27,000 
Gross profit 
105,000 
44,000 
33,000 
Administrative expenses 
43,000 
12,000
9,000 
Profit before tax 
62,000 
32,000 
24,000 
Income taxes 
23,000 
8,000
6,000 
Profit for the year 
39,000 
24,000 
18,000 
Note
.
Retained earnings brought forward 
81,000 
40,000 
Retained earnings carried forward 
108,000 
58,000 
Required 
Prepare the consolidated statement of profit or loss and movements on retained earnings. 
ANSWER 
The shares in S Co were acquired three months into the year. Only the post-acquisition proportion (nine 
months' worth) of S Co's statement of profit or loss is included in the consolidated statement of profit or 
loss. This is shown above for convenience; in your exam, you will have to calculate the proportion to 
include. 
P CO
CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 20X5 
$
Revenue (170 + 60) 
230,000 
Cost of sales (65 + 27) 
92,000 
Gross profit 
138,000 
Administrative expenses (43 + 9) 
52,000 
Profit before tax 
86,000 
Income taxes (23 + 6) 
29,000 
Profit for the year 
57,000 
Profit attributable to: 
Owners of the parent (bal. fig.) 
49,800 
NCI (40% 

18,000) 
7,200 
57,000 
Movement on retained earnings 
Group profit for year 
49,800 
Retained earnings brought forward* 
81,000 
Retained earnings carried forward 
130,800 
* All of S Co's retained earnings brought forward are pre-acquisition. 
 
BPP Tutor Toolkit Copy

---