Group Accounts

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Acquiring Sole trader means

we own its assets liabilities profits and losses. Same is with

partnership. This all is recorded

in parents statements.

Acquiring company means we

acquire shares instead of individual assets. Investments is recorded at

cost in parent's statements.

IFRS 3 is followed.

Total assets should be equal

to equities and liabilities to balance the statement.

0- 20% share capital: No

effective influence. Accounting

treatment: can only account for dividends rcvd. Do not consolidate.

20%-50% share capital:

significant effective influence. Accounting treatment: Equity and it is

associated company. It's just investment. No consolidation is required.

More than 50%: control Accounting: acquisition and here consolidated

financial statement or group financial statements.

Only if company is a

subsidiary then consolidation is done it is not for associated.

In consolidation investment

in subsidiary is not reported or mentioned or shown.

Share capital is only shown

of parent in consolidated statement not of subsidiary.

Working no 1 is to show how

much parent owns subsidiary's share capital.

Working no 3:Consolidated

Retained Earnings .

Retained earnings are shown

of parent plus subsidiary's post acquisition since we acquired subsidiary.

W3 is done to achieve

Consolidated retained earnings which have been achieved under the control

of parent company.

Sometimes it is not necessary

that you have more than 50% of share capital and you do have the power to

influence.

Sometimes one may own less

than 50% but can have an influencing right. E.g. If one lends u money and

asks that on behalf of it you have to appoint my 2 directors, even I don't

have the company's capital more than 50% but I can appoint in that case if

the company agrees to it.

Own more than half but don't

have control

Lender with power to appoint a majority

of the board

Company is in liquidation so

power is transferred to liquidator even if one owns 100% of the company.

Q: Where may a

parent wish to exclude subsidiary form consolidation?

A: Because of poor

subsidiary performance. But IFRS3 says if one has subsidiary must show the

subsidiary.

Or because the

expense of consolidation is greater than benefit. If Immaterial subsidiaries

are there than 1 can exclude or do not show. To this auditors and directors

must agree.

Or because of

Expense or delay I.e. year ends do not match

Then the months

coming in that accounting period of company are consolidated.

Any subsidiary

activity should be included until u get up to 75% u have to do segmented

reporting. It was done before but not now.