Summary
Summary Interim Acquisitions
- Course
- Institution
Summary of Interim Acquisitions for third year BAcc course.
[Show more]
Seller
Follow
stelliesaccounting
Reviews received
Content preview
GROUP STATEMENTS: INTERIM ACQUISITIONSGroup Statements Vol 1: Chap 8
− Purchase of interest in subsidiary on a different date than the first day of financial period
− Retained earnings value not given on the acquisition date.
− Profit/loss of subsidiary for the period should be allocated between before- and after acquisition profit/loss.
Pre-acquisition profits. B/Y → Acquisition date = RE-AT
Post-acquisition profits. Acquisition date → Y/E = PROFIT FOR THE YEAR
ALLOCATION – ITEMS IN SCI
− General approach
o Apportion based on available information, if not possible, treat as if accrue from day to day
(EVENLY ACCRUED)
− Therefore, examine each item to determine basis of apportionment
o Depreciation: day to day
o Profit on sale of asset: specific day
o Interest: different rates/tariffs
o Normal tax: in ratio of the taxable income for the periods before and since acquisition
Distribution of profits
8/12 4/12
Total Pre-Acq Post-Acq
Income
CoS
Expenses
Profit before tax 180 100 80
Tax (30) 30 x 100/180 30x 80/180
− Method (par 9.06) to prepare the income statement
o Only include post-acquisition profit of subsidiary in group profit
o Alternative method in text book - not supported by IAS27 – include the pre and post acq profits BUT
then take out the pre- acq again.
Prepare the Income Statement
H 100% + S 100% [12/12]- jrnl (to take out part when not a S) [9/12]
THUS effectively H 100% + 3/12
THUS only the post-acq profits are included
ALLOCATION – SCE
− Preference dividends:
o term cost on time basis
o Accrue over time (esp. if cumulative)
− Year-end items:
o post-acquisition period (eg transfers to/from reserves and dividends declared)
o Include S and adjs
− Adjustments in respect of previous years:
o pre-acquisition period (eg correction of prior period errors)
− Special items:
o when transaction took place (eg interim ordinary dividends)
Beginning → No S (Thus opening balances = H)
End → Including the S
NOTE: SFP – 100%
QUESTION 1:
The following represents the financial statements of the H Ltd. group of companies for the year ended 31 December 20.7
1
, H Ltd. obtained its investment in T Ltd. on 1 July 20.7. The operating profit of T Ltd. accumulated evenly throughout the year except for
the interest to H Ltd. paid from 1 July 20.7.
H Ltd. sold inventories to T Ltd. from 1 July 20.7 – the sales taking place at cost price plus 50%. Included in the net current assets of T
Ltd. on 31 December 20.7 are R300 000 regarding such inventories. The total sales of H to T amounted to R1 500 000 for the period.
H = seller → Does not affect the analysis
Accept a tax rate of 40%.
No impairment of goodwill has taken place.
REQUIRED
Prepare the consolidated financial statements of die H Ltd.-group for the year ended 31 December 20.7.
Do apportionment of profit without taking intergroup transactions into account.
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller stelliesaccounting. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.82. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
80796 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now