Consolidation Challenge

Replies to This Discussion

Permalink Reply by Liam Bastick on June 19, 2009 at 12:45am

Hi,

I don't have enough information to answer your first question, although it does look like C is a subsidiary of A (depends on control, related parties, etc.).

For your second question, the answer is (as usual!) it depends. Perhaps this generic Excel file will assist you...

Attachments:

• Various Consolidation Examples.xls, 476 KB

▶ Reply to This

Permalink Reply by MUB on June 20, 2009 at 8:53am

Thanks Liam.
The sheet looks interesting. I will go through it but unfortunately my questions are still there!!
Anyone else! please!!

▶ Reply to This

Permalink Reply by Liam Bastick on June 22, 2009 at 4:35am

Please note the FCTR entries are contained in the attachment (i.e. second question answered).

▶ Reply to This

Permalink Reply by Paolo Maloberti on June 22, 2009 at 9:20am

Sorry, but I've not correctly understud the group flow chart.
would you mind to send it
tk
Paolo

▶ Reply to This

Permalink Reply by Jemima Arthur on June 22, 2009 at 9:35am

You debit your foreign bank account and then you credit your foreign currency reserve account.

▶ Reply to This

Permalink Reply by wilfred on June 22, 2009 at 9:36am

Hi I think C,E ,F are just normal investments for the parnet company since the do not reach the thresh hold of an associate and as such should be reported in the group balance sheet as an investment

▶ Reply to This

Permalink Reply by Qais on June 22, 2009 at 9:36am

Thanks Liam,

Iteresting sheet,
I have a question which i appreciate if some one can help, If one of the subsidiaries included in the consolidation model owns another subsidiary ....for example if the parent company (P) owns 60% of the subsidiar (S) at the same time S owns 70% of (C).. then in S consolidated financials there will be a minority of 30%.

How i will reflect this in P consolidated financials when i do the elemination

I think that the investment in P should equal the equity of S + Minority interest booked in S (30% of C) then i should eleminat the investment aginst the equity of S+ minority interest of S....please correct me if wrong.

Regards.

▶ Reply to This

Permalink Reply by Caven Nyamutowa on June 22, 2009 at 9:37am

For A & C a consolidation should be done on the basis that C is a subsidiary of A i.e all the partners of A have a stake in C through the 55% shareholding. As for B only related party transactions should be reconciled since there isn't direct ownership by either company A or C unless there is any at group level & not disclosed in the availed structure.

▶ Reply to This

Permalink Reply by wilfred on June 22, 2009 at 9:44am

Thanks Liam
This is excellent

▶ Reply to This

Permalink Reply by sundaramany on June 22, 2009 at 10:03am

Consolidation may be done in two ways. One is splitting the b/s veritically, based on stake %, and adding, then eliminating related parties. The other is to consider capital contributions to other entities as investments & booking/absorbing profits/losses of those companies. The treatment would differ group to group depending on structuring, e.g holding company & subsidiaries, or mere partnerships/joint ventures.

▶ Reply to This

Permalink Reply by yasir sayeed on June 22, 2009 at 11:01am

Hi,
As far as ur first question is concerned,consolidation can occur in group as well,its in our language called group accounting.,where we normally used business combination (IAS).
While in relation to ur concept regarding entity,group must reflect as a combination of different entities ,but it again based on whether its a subsidiary or associate .(which will be helpfull in case of taxation gain or loss sharing within the entities in a group) ok.

With respect to ur second question :
* The amount of exchange differences recognised in profit or loss (excluding differences arising on financial instruments measured at fair value through profit or loss in accordance with IAS 39). [IAS 21.52]
* Net exchange differences classified in a separate component of equity, and a reconciliation of the amount of such exchange differences at the beginning and end of the period. [IAS 21.52]
* When the presentation currency is different from the functional currency, disclose that fact together with the functional currency and the reason for using a different presentation currency. [IAS 21.53]
* A change in the functional currency of either the reporting entity or a significant foreign operation and the reason therefor. [IAS 21.54]

▶ Reply to This

Permalink Reply by Ahmed Hussain Abbas on June 22, 2009 at 11:11am

1. Alfa Group comprise of 2 companies Company A and Company C and for consolidation purpose Company A should make consolidated financial statements as a group apart from its own entity level seperate financial statement, reason for A making consolidated financial statement is, it has controlling authority over the decision making and running of SUBSIDIARY company and the investment in SUBSIDIARY will effect the investing company financial standing in some way. Given assumption that they do have control than it becomes some what an extension of their own operation, and every company is required to disclose its operation in financial terms (financial statement), so as per management level it's not just conversion of numbers and compilation its the true position of an entity.

2) First take last period translated figure of individual assets/liabilities than Convert your current subsidiary balance sheet @ closing rate, any resultant difference in each and every asset and liability would increase/ decrease an asset/liability value and correspondingly increase/decrease your exchange reserve
For consolidation purpose equity translation of subsidiary, always use Historic rate of the day of acquisition of subsidiary.

For profit and loss it is advisable to use average rate and use the transferred to retained earning at the same rate so no exchange gain and loss there.

▶ Reply to This

• ‹ Previous
• 1
• 2
• Next ›
• Page