Consolidation Adjustments and Eliminations

CHAPTER 2:
CONSOLIDATION
SUBSEQUENT TO THE
DATE OF ACQUISITION
CHAPTER 2
1
LEARNING OBJECTIVES
To differentiate between pre-acquisitions and postacquisitions reserves

To determine the unrealised profits for intragroup
To prepare consolidation journal entries and
related adjustment and elimination
To prepare consolidation worksheet
To prepare
1) a consolidated statement of comprehensive
income
2) a consolidated statement of changes in equity
3) a consolidated statement of financial position2
PRE-ACQUISITION RESERVES
The
reserves existing in the subsidiary on

the date of acquisition
Non-distributable reserves by the parent
Eliminated in consolidation (against COI)
POST-ACQUISITION RESERVES
Increase
@ decrease in reserves after

acquisition
Include in consolidated reserves
Example:
Post-acquisition
profit - profit made by

subsidiary after acquisition
Post-acquisition Other Comprehensive Income:
Revaluation of assets
Foreign exchange reserves
Fair value reserve AFS Investment
CONSOLIDATION
PROCEDURES:
The carrying amount of the parents investment

in the subsidiary & the parents share of the
equity (share capital and pre-acquisition
reserves) of the subsidiary are eliminated.
2. Eliminate intragroup balances & transactions
3. Eliminate Unrealised profits from intragroup
transactions
4. The NCI in current year profit & the net asset of
the subsidiary
5. The Statement of Comprehensive Income &
Statement of Financial Position of the parent &
subsidiary are combined line-by-line
(MFRS 10: para B86)
1.
CONSOLIDATION ADJUSTMENTS
the eliminations of the accounts/transactions
are only for the purpose of preparing
consolidated financial statements.
Thus, it will not effect on the parent and
subsidiary books.
EXAMPLE 1
Maju Bhd acquired 100% of the issued share
capital of Jaya Bhd on the 30 June 2012 for a
total consideration of RM120,000.
At that date, Jaya Bhds net assets at fair value
was represented by share capital of RM100,000
and retained profit of RM20,000.
The statement of financial position of Maju and
Jaya as at 30 June 2013 are as follows.
Statement of Financial Position of Maju and Jaya

as at 30 June 2013
Land
Investment in Jaya
Debtors
Bank
Long term Loan
Creditors
Share Capital
Retained profit
Maju Bhd
(RM)
400,000
120,000
230,000
50,000
(100,000)
700,000
500,000
200,000
700,000
Jaya Bhd
(RM)
150,000
50,000
30,000
(50,000)
(30,000)
150,000
100,000
50,000
150,000
REQUIRED:
1. Determine the pre acquisition and postacquisition reserves as at 30 June 2013.
2. Prepare the consolidated worksheet as at 30 June
2013
ANSWER
1) Reserve:
Pre-acquisition = 100% x 20,000
= 20,000
Post-acquisition = 100% x (50,000 - 20,000)
= 30,000
2) Consolidation journal entry
Dr Share capital
100,000
Dr Retained profit
20,000
Cr Investment in Jaya
120,000
(to eliminate COI)
10
Maju
Jaya
RM000 RM000
Adjustment
DR
CR
Consol.
Balance
Land
400
150
Inv in Jaya
120
Debtors
230
50
280
50
30
80
(50)
(50)
(100)
(30)
(130)
700
150
730
Share Capital
500
100
100
500
Retained profit
200
50
20
230
700
150
Bank
Long term loan
Creditors
550
120
730 11
POST-ACQUISITION PROFIT FOR

NON-CONTROLLING INTEREST
need to proportionate based on NCI %

included in the CSCI under NCI a/c
Calculation: % of NCI x Profit After Tax of
subsidiary
Assume no intragroup transaction:
Dr. Non-Controlling Interest (CSCI) xx
Cr. Non-Controlling Interest (CSFP)
xx
(to record NCI for share of profit for the year)
12
EXAMPLE 2:
On 31 Dec 2011, WWW Bhd acquired 80% interest in

RRR Bhd at purchase consideration of RM32,000. At
the date of acquisition, net asset of RRR Bhd
represented by equity is as follows:
Share Capital
20,000
Retained Earning
10,000
Revaluation reserve
10,000
Financial statement for both companies on 31/12/2012
are as follows:
13
STATEMENT OF FINANCIAL POSITION AS AT

31/12/2012
WWW Bhd
(RM000)
RRR Bhd
(RM000)
Share Capital
50,000
20,000
Revaluation reserve
50,000
15,000
Retained Earning
60,000
35,000
Liability
22,000
50,000
182,000
120,000
32,000
150,000
120,000
182,000
120,000
Investment in RRR Bhd

Other assets
14
STATEMENT OF COMPREHENSIVE
INCOME FYE 31/12/2012
WWW Bhd
(RM000)
RRR Bhd
(RM000)
40,000
40,000
(20,000)
(15,000)
Profit for the period
20,000
25,000
Retained earning 1/1/2012
40,000
10,000
60,000
35,000
Profit before tax

Tax
Dividend
Retained earning 31/12/2012
Additional information:
No intragroup transactions occur during the period.
15
SUGGESTED ANSWER:
Consolidation journal entries:
To eliminate investment in subsidiary
Dr Share capital (80% x 20,000)
16,000
Dr Rev. reserve (80% x 10,000)
8,000
Dr Retained Earning (80%x10,000)
8,000
Cr Investment in RRR Bhd
32,000
16
SUGGESTED ANSWER: (CONT..)

To record NCI in current year profit
Dr. NCI (20% x 25,000) (CSCI)
5,000
Cr. NCI (CSFP)
5,000
To record NCI in subsidiarys net assets

Dr. Share capital (20% x 20,000) 4,000
Dr. Rev reserve (20% x 15,000)
3,000
Dr. R Earning (20% x 10,000)
2,000
Cr. NCI (CSFP)
9,000
17
CONSOLIDATED WORKSHEET
WWW
Bhd
Income Statement
Profit before tax
Tax
Profit for the period
RRR
Bhd
Adj.
40,000 40,000
(20,000) (15,000)
20,000
80,000
(35,000)
25,000
Attributable to:
Equity holders of the parent
NCI
*25,000 x 0.8 = 20000 + 20,000
Consol.
Balance
45,000
b)5,000
*40,000
5,000
18
WWW
Bhd
Balance Sheet:
Investment in RRR
Bhd
Other assets
RRR
Bhd
Adjustment and
elimination
32,000
150,000
120,000
Equity and liabilities

Equity attributable to equitys holders of the parent:
Share Capital
50,000
20,000
a)16,000
c)4,000
Revaluation reserve
50,000
15,000
a)8,000
c)3,000
Retained Earning
60,000
35,000
a)8,000
b)5,000
c)2,000
NCI
Liability
22,000
50,000
Consol.
Balance
a)32,000
270,000
270,000
50,000
54,000
80,000
b)5,000
c)9,000
14,000
19
72,000
270,000
INTRAGROUP
TRANSACTIONS
Parents & its subsidiary may trade within the

group.
Group viewpoint - all the intragroup transaction
have to be eliminated, as the group is a single
entity.
Logically, the group cant possibly trade/ make
profits from themselves.
Any intragroup transactions will be eliminated
when the consolidated financial statements are
prepared.
the group must represent as a single entity.
can avoid double counting the assets, liabilities,
20
revenue & expenses.
removing gains and losses recognized
INTRAGROUP
TRANSACTIONS
MFRS 10: Intragroup balances and intragroup

transactions and resulting unrealised profits
(URP) should be eliminated in full. Intragroup
losses may indicate an impairment that requires
recognition in the consolidated financial statements.
(para B86 (c))
Noted that the eliminations of the transactions are
only for the purpose of preparing consolidated
financial statements. Thus, it will not effect on the
parent and subsidiary books.
21
INTRAGROUP
TRANSACTIONS
1. Intragroup Sale of trading inventories
2. Intragroup Sale of fixed assets
a) Non depreciable asset
b) Depreciable asset
3. Intragroup Dividends
4. Other Intragroup transactions
22
INTRAGROUP SALES OF
INVENTORIES
The sales of inventory can be transferred either at cost

prices or at selling / transfer / invoice prices.
When the inventory are transferred at cost price, no
intragroup profits or losses can possibly arise as the
inventories only been transferred from one location (seller)
to another location (buyer) within the group as a single
entity.
When th inventory are transferred at selling prices or above
the cost price - Unrealised profit (URP) exists
2 situations:
The buyer managed to sell all the inventories during the
year no URP.
The buyer still hold an amount in their inventories
23
URP shall be eliminated
INTRAGROUP SALES OF
INVENTORIES
Calculation for unrealised profit in ending inventories:
based on % of profit that has been defined.
Inventories transferred above cost: 20% on cost
Cost + Profit
= Sales
100% + 20% = 120%
URP = 20/120 x intragroup ending inventories
Inventories transferred at selling price: 20% on selling
price
Cost + Profit = Sales
80% + 20% = 100%
URP = 20/100 x intragroup ending inventories
24
INTRAGROUP SALES OF INVENTORIES

Example 3:
CD acquired AB in 2010 with 80% interest.
During financial year 2012, AB sold inventories to
CD at transfer prices amounted to RM20,000. At
year end, RM5,000 remained in CDs ending
inventories. The profit margin was 20% on selling
prices.
For year 2013, intragroup sales was RM30,000 and
RM4,000 remained in CDs ending inventories.
Assume income tax rate is 30%.
Required:
Record the necessary journal entries for 2012
25
INTRAGROUP SALES OF INVENTORIES
Solution:
2012
Eliminate intragroup sales during the year 2012:
DR
Sales
20,000
CR Purchase
20,000
Eliminate URP for the year @ carried forward:
DR
Ending Inventories (CSCI)
1,000
CR Ending Inventories (CSFP)
1,000
(URP = 5,000 x 20% = 1,000)
26
INTRAGROUP SALES OF
INVENTORIES
Solution (cont):
2013
Eliminate intragroup sales during the year:
DR
Sales
30,000
CR Purchases
30,000
Reinstate unrealised profit brought forward:
Dr.
Retained profit b/f
1,000
Cr. Beginning Inventories
1,000
Eliminate URP for the year @ carried forward:
DR
Ending Inventories (PL)
800
CR Ending Inventories (BS)
800
27
UPSTREAM SALES &

DOWNSTREAM SALES
intragroup sales of inventories can either be

upstream or downstream.
Upstream - subsidiary sold the inventories to
parent.
Downstream - parent sold the inventories to
subsidiary.
It is important to determine the relationship, as
the accounting treatment is different.
28
UPSTREAM SALES
The
profits from the intragroup sales will be

recorded by the subsidiary, as the subsidiary
is a selling company.
Thus,
when the full unrealised profits are

eliminated, the share of profits for noncontrolling interest must be allocated based
on the percentage in the subsidiary.
29
UPSTREAM SALES
The non-controlling interests share of profits

or to record NCI in CSCI:
NCI % holding in
the selling
subsidiary
Subsidiarys profit after tax

(+) Unrealised profit b/f
() Unrealised profit c/f
To record NCI in CSFP:

NCI % holding in
the selling
subsidiary
Subsidiarys Retained Profit b/f

() Unrealised profit b/f
30
UPSTREAM SALES
Example 4:
Based on Example 3, assume the transactions during

year 2003 were as follows:
Profit after tax of AB
= RM60,000
Retained profits b/f of AB
= RM120,000
Sales to CD
= RM30,000
Ending inventories in CD
= RM4,000
Calculate the share of NCI for URP in CSCI and CSFP.
31
UPSTREAM SALES
Solution:
Step 1: Determine the URP c/f = 20/100 x 4,000

= 800
Step 2: Determine the URP b/f = 20/100 x 5,000

= 1,000
NCI in CSCI = 20% x (60,000 +1,000 - 800)

= 12,040
NCI in CSFP = 20% x (120,000 -1,000)

= 23,800
32
DOWNSTREAM SALES
The parent will record the profits from the

intragroup sales, as the parent is a selling
company.
when the full unrealised profits are eliminated,
the share of profits for non-controlling interest
will not be affected
33
INTRAGROUP SALE OF FIXED

ASSETS: NON-DEPRECIABLE ASSETS
Consolidation adjustment:
Eliminate the unrealised profits and

reduce the asset account to its original book
value at the date of intragroup transfer or sale
Example 5:
AB Bhd acquired a 60% interest in XY Bhd in 1

January 2010. On 20 March 2012, XY Bhd sold a piece
of land AB Bhd for RM1,800,000. The land was bought
by XY Bhd in 1 January 2008 at cost RM1,000,000. AB
Bhd held the land until 31 December 2014 when it was
sold to outside party for RM2,000,000.
Required: Prepare the consolidation journal entry for
34
the years 2012, 2013 and 2014.
Solution:
Year 2012
DR Profits on sale of land 800,000
CRLand 800,000
(To eliminate the unrealised profits and restate the land
at original cost)
[1,800 1,000]
Year 2013
DR Retained profits b/f 800,000
CRLand 800,000
(To eliminate the unrealised profits and restate the land
at original cost)
35
Solution (cont..):
Year 2014
Calculate the profits on sale of land
Sales prices
Book Value
Profit on sale
Companys
viewpoint
RM
2,000,000
1,800,000
200,000
Groups
viewpoint
RM
2,000,000
1,000,000
1,000,000
DR Retained profits b/f

800,000
CRProfits on sale of land
800,000
(To record realisation of the unrealised profits)
36

ASSETS: DEPRECIABLE ASSETS
After the sale, the purchasing company will calculate

depreciation on the basis of its purchased price.
Recorded depreciation must be corrected on consolidation
Restate the balances in the assets and accumulated
depreciation accounts so that the amount based on the
original cost.
Consolidation adjustment:
Eliminate the unrealised profits
Reduce the asset account to its original book value at the
date of intragroup transfer or sale.
Eliminate the difference between the annual depreciation
expenses recorded by the purchasing company and the
amount based on original acquisition cost recorded by the
selling company before transfer.
Downstream transfer/sale vs upstream transfer
37

Modifications are required in the calculation of NCI:
In the year of sale/transfer:
NCIs %
holding

(+) Depreciation adjustment
() full unrealised profits
In subsequent years and over remaining useful life:

NCIs %
holding

(+) Depreciation adjustment
38

Example 6:
AB Bhd acquired a 60% interest in XY Bhd on 1 January
2010. On 20 March 2012, AB Bhd sold a machinery to XY
Bhd for RM800,000. The machinery was bought by AB Bhd
on 1 January 2007 at cost of RM1,200,000 and accumulated
depreciation on 20 March 2012 was RM600,000.
The group policy is to depreciate this type of machinery on
a straight line basis over period of 5 years and to provide a
full years depreciation if the machinery has been used for
more than 6 months in the year. Remaining useful life of
the machinery is 5 years. Ignored the tax effect.
REQUIRED: Prepare the consolidation journal for 2012

until 2017.
39
Solution:
Calculate profits on sales of fixed assets:

Sales prices
800,000
Book Value
(600,000) [1,200 - 600]
Profit on sale
200,000
Calculate depreciation expenses
Companys viewpoint Groups viewpoint
RM
RM
Book Value
Depreciation
800,000
600,000
800,000/5
600,000/5
=160,000
=120,000
Differences on depreciation expenses of RM40,000
Adjustments in consolidated accounts are needed as the
depreciation expenses are overstated.
40
Solution (cont):
Year 2012
DR Profit on sales of FA 200,000
CRFixed asset
200,000
(To eliminate the URP and restate the assets at
original cost)
DR Accumulated depreciation
40,000
CRDepreciation expenses
40,000
(To correct for depreciation over provided)
41
Solution (cont):
Year 2013
DR Retained profit b/f
160,000
40,000
CRFixed assets
200,000
(To restate opening balances relating to sale of fixed assets)
40,000
40,000
42
Solution (cont):
Year 2014
120,000
80,000
CRFixed assets
200,000
(To restate opening balances relating to sale of FA)
DR Accumulated depreciation 40,000

40,000
43
Solution (cont):
Year 2015
80,000
120,000
CRFixed assets
200,000

40,000
44
Solution (cont):
Year 2016
40,000
160,000
CRFixed assets
200,000

40,000
45
Solution(cont):
Year 2017
CRFixed assets
200,000
200,000
Noted: If the fixed assets continue to be used. This is

because the machinery is fully depreciated and the
unrealised profits been fully realised in the year 2016.
46
Solution:
b) Assume that on 1 January 2016, XY Bhd sold the machinery
to outside party for RM500,000.
Pofits on sale of fixed assets
Companys
viewpoint
RM
Groups
viewpoint
RM
Sales prices
500,000
500,000
Book Value
160,000*
120,000**
Profit on sale
340,000
380,000
* 800 [(800/5) x 4] = 160

** 600 [(600/5) x 4] = 120
47
Solution:
From groups viewpoint, the profits on sales of
machinery is RM380,000 as it is recorded at
original book value of RM600,000. The differences
between profits on sale of fixed assets by
companys viewpoint and groups viewpoint need
to be adjusted. The journal entry would be:
Dr Retained profits b/f
40,000
Cr Profits on sale of fixed assets
40,000
(To record realisation of URP profits on fixed assets)
The journal entry shows that the profits on sale of

fixed assets balances in the group account will be
increased to RM380,000.
48
TAX EFFECT ON URP
If adjustment on URP has tax effect, defferd tax assets

or liability should be recognized (MFRS 112)
Additional consolidation adjustment
Year 1:
Dr. Deffered Tax
xx
Cr. Tax expense
xx
Year 2:
- depend on types of intragroup transaction
49
TAX EFFECT ON URP:

SALE OF INVENTORIES
Example : Refer to Example 3 (slide 25)
Solution:
2012
DR Sales
20,000
CR Purchase
20,000
(To eliminate intragroup sales during the year 2012)
DREnding Inventories (CSCI)

1,000
1,000
(To eliminate URP for the year @ carried forward)
DR Deferred tax (CSFP) (1,000 x 30%) 300

CR Tax exp (CSCI)
300
(To account for tax effect of the profit deferred)
50
Solution(cont)
2013
DR
Sales
30,000
CR Purchases
30,000
(To eliminate inter-company sales during the year 2002)

Dr. Retained profit b/f
Dr. Tax Expense
300
700
Cr. Beginning Inventories
1,000
(To reinstate unrealised profit brought forward)

DR Ending Inventories (CSCI)
800
800
(To eliminate URP for the year @ carried forward)

DR Deferred tax (CSFP)
CR Tax exp (CSCI)
240
240
(To account for tax effect of the profit deferred)
51
TAX EFFECT ON URP

SALE OF NON-DEPRECIABLE
ASSETS
Example : Refer to Example 5 (slide 34)

Solution
Year 2012
DR Profits on sale of land
800,000
CR Land
800,000
(To eliminate the unrealised profits and restate the land at
original cost)
DR Deferred tax (CSFP)
CR Tax exp (CSCI)
240,000
240,000
(To account for the related tax effect of the elimination of URP)
(800,000 x 30%)
52
Solution (cont):
Year 2013
DR
DR
Retained profits b/f

560,000
Deferred tax
240,000 (800,000 x 30%)
CR Land
800,000
(To eliminate the unrealised profits and restate the land at original
cost)
Year 2014
DR Retained profits b/f
560,000
DR Deferred tax
240,000 (800,000 x 30%)
CR Profits on sale of land
800,000
(To record realisation of the unrealised profits)
DRTax exp
240,000 (800,000 x 30%)
CR Deferred tax
240,000
53
(To account for the reversal of tax effect of the elimination of URP)
TAX EFFECT ON URP

SALE OF DEPRECIABLE ASSETS
Example : Refer Example 6 (slide 40)
Year 2012
DR
Profit on sales of Fixed Asset 200,000
CR Fixed asset
200,000
(To eliminate the URP and restate the assets at original cost)
DR Deferred tax (200,000 x 30%) 60,000
CR
Tax exp
60,000
(To account for the related tax effect of the elimination of URP)
40,000
CR Depreciation expenses
40,000
DR Tax exp (40,000 x 30%)
12,000
CR Deferred tax
12,000
54
Solution (cont)
Year 2013
DR Retained profit brought forward 112,000

DR Deferred tax
48,000
CR Fixed assets
200,000
(160,000 x 30%)
40,000
40,000
CR Depreciation expenses 40,000

DR Tax exp (40,000 x 30%) 12,000

CR Deferred tax 12,000
55
Solution (cont)
Year 2014
DR Deferred tax
84,000
36,000
(120,000 x 30%)
80,000
CR Fixed assets
200,000
(To restate opening balances relating to sale of FA)
40,000
40,000
DR Tax exp (40,000 x 30%)

12,000
CR Deferred tax
12,000
56
Solution (cont)
Year 2015
56,000
DR Deferred tax
24,000
(80,000 x 30%)
CR Fixed assets
200,000
40,000
40,000
DR Tax exp (40,000 x 30%)

12,000
CR Deferred tax
12,000
57
Solution (cont)
Year 2016
DR Deferred tax
28,000
12,000
(40,000 x 30%)
160,000
CR Fixed assets
200,000
40,000
40,000
DR Tax exp (40,000 x 30%)
12,000
CR Deferred tax
12,000
58
Solution (cont)
Year 2017
DR
Accumulated depreciation 200,000

CR Fixed assets
200,000
b) If 1 January 2016, XY Bhd sold the machinery to outside

party for RM500,000.
DRRetained profits b/f
28,000
DR Deferred tax (40,000 x 30%)
12,000
CR Profits on sale of fixed assets 40,000
(To record realisation of unrealised inter-company profits on
fixed assets)
DR
Tax exp (40,000 x 30%) 12,000

59
CR Deferred tax (b/s)
12,000
INTRAGROUP DIVIDENDS
Dividends paid/payable by a subsidiary are received /receivable

by its parent.
Group viewpoint - no change in the groups profit
- shifting of profit from one location to another location
On consolidation, dividend income received/receivable by the
parent should be eliminated against dividends paid/declared
by subsidiaries in the CSCI
In Malaysia, the paying company paid the dividend at net of
tax and the receiving company recorded the dividend income
at gross amount (before tax).
The intragroup dividend must be eliminated in full and the
proportion of non-controlling interest need to be allocated.
Thus, the elimination journal entries will depend on whether
the dividend is already been recorded or not.
60
INTRAGROUP
DIVIDENDS(CONT)
Example 7:
AB Bhd acquired a 60% interest in XY Bhd in 1 January 2010 for

a cash consideration of RM160,000. The net assets of XY Bhd at
that date were represented by share capital of RM100,000 and
retained profits of RM80,000.
During the year 2012, XY Bhd paid a dividend of RM140,000 (net
of tax) and AB Bhd recorded as dividend income in the statement
of comprehensive income. XY BHd also made a proposed
dividend of RM60,000 recorded in statement of financial position
and AB Bhd recorded as dividend receivable in the statement of
financial position . Corporate rate tax for 2002 is 30%.
Required:
Record the eliminations journal entries for intragroup dividend.
61
Solution:
DR Dividend income
CR
120,000
[(140,000/.7) x 60%]
Tax expenses
36,000 (120,000 x 30%)
CR Dividend paid (140,000 x 60%)
84,000 (120,000 x 70%)
(To eliminate intragroup dividend in the profit and loss account)
DR Non-controlling interest (CSFP) 56,000

CR Dividend paid(140,000 x 40%) 56,000
(To allocate intragroup dividend paid for non-controlling interest)
Parent and subsidiary recorded the dividend in the balance sheet.
DR Dividend proposed
60,000
CR Dividend receivable
36,000 (60,000x60%)
CR Other creditors (NCI)
24,000 (60,000 x 40%)
(To eliminate intragroup dividend in balance sheet and allocate to non-62

controlling interest)
OTHER INTRAGROUP
TRANSACTIONS
intragroup loans that give rise to interest income

and interest expense
Management fees charged by the parent company
the effects of all such intragroup transactions
in a group must be eliminated
63
OTHER INTRAGROUP TRANSACTIONS

Journal entries
To eliminate intragroup loan balances:

DRLoan from Parent or Subsidiary
xx
CR Loan to Parent or Subsidiary
xx
To eliminate intragroup balances:
DRAccount payables
xx
CR
Account receivables
xx
To eliminate intragroup for management fees, rental

and interest:
DR Management fees/rental/interest received
xx
CR Management fees/rental/interest paid
xx
64
OTHER CONSOLIDATION
ADJUSTMENTS:
Impairment of Goodwill on Consolidation

Goodwill
on consolidation subject on impaiment test
Adjustment for Depreciation on Revalued

Assets
If
subsidiary did not adjusted its book for the

revaluation, additional consolidation journal entry is
required.
65
Comprehensive Example:
END OF CHAPTER 2
66

Consolidation Adjustments and Eliminations

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CHAPTER 2:

To differentiate between pre-acquisitions and postacquisitions reserves

reserves existing in the subsidiary on

@ decrease in reserves after

profit - profit made by

The carrying amount of the parents investment

Statement of Financial Position of Maju and Jaya

POST-ACQUISITION PROFIT FOR

need to proportionate based on NCI %

On 31 Dec 2011, WWW Bhd acquired 80% interest in

STATEMENT OF FINANCIAL POSITION AS AT

Investment in RRR Bhd

Profit for the period

Retained earning 1/1/2012

Profit before tax

SUGGESTED ANSWER: (CONT..)

To record NCI in subsidiarys net assets

Equity and liabilities

Parents & its subsidiary may trade within the

MFRS 10: Intragroup balances and intragroup

4. Other Intragroup transactions

The sales of inventory can be transferred either at cost

INTRAGROUP SALES OF INVENTORIES

INTRAGROUP SALES OF INVENTORIES

UPSTREAM SALES &

intragroup sales of inventories can either be

profits from the intragroup sales will be

when the full unrealised profits are

The non-controlling interests share of profits

Subsidiarys profit after tax

To record NCI in CSFP:

Subsidiarys Retained Profit b/f

Based on Example 3, assume the transactions during

Step 1: Determine the URP c/f = 20/100 x 4,000

Step 2: Determine the URP b/f = 20/100 x 5,000

NCI in CSCI = 20% x (60,000 +1,000 - 800)

NCI in CSFP = 20% x (120,000 -1,000)

The parent will record the profits from the

INTRAGROUP SALE OF FIXED

Eliminate the unrealised profits and

AB Bhd acquired a 60% interest in XY Bhd in 1

DR Retained profits b/f

INTRAGROUP SALE OF FIXED

After the sale, the purchasing company will calculate

INTRAGROUP SALE OF FIXED

Subsidiarys profit after tax

In subsequent years and over remaining useful life:

Subsidiarys profit after tax

INTRAGROUP SALE OF FIXED

REQUIRED: Prepare the consolidation journal for 2012

Calculate profits on sales of fixed assets:

(To restate opening balances relating to sale of fixed assets)

DR Accumulated depreciation 40,000

(To restate opening balances relating to sale of fixed assets)

DR Accumulated depreciation 40,000

(To restate opening balances relating to sale of fixed assets)

DR Accumulated depreciation 40,000

(To restate opening balances relating to sale of fixed assets)

Noted: If the fixed assets continue to be used. This is

Pofits on sale of fixed assets

* 800 [(800/5) x 4] = 160

The journal entry shows that the profits on sale of