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FAC3762 EXAM PACK 2023
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FAC3762 EXAM PACK2023
[School]
[Course title]
,FAC3762
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Consolidation of wholly-owned subsidiary at date of acquitition:
Basic consolidation techniques:
- Eliminate common items - (Eliminate investment & share capital)
- Eliminate intragroup items - Sales that took place in the group.
- Consolidate the remaining items
3 of the situations will arise when a parent obtains interest in a subsidiary:
- Acquisition at net asset value: Investment = Fair value of asssets and liabilities aquired.
- Acquisition at a premium: Investment < Fair value of asssets and liabilities aquired. {GOODWILL}
Consolidation of partly-owned subsidiary at date of acquitition:
- Determine the persentage interest (Interest in Sub/Issued shares of the sub) x 100 = x%
- Eliminate common items - (Eliminate investment & share capital)
- Eliminate intragroup items - Sales that took place in the group.
- Consolidate the remaining items
- Identify the format of what is reqEu-mireadils? ; Memo ; Report
- Apply the theory to the scenatio
- Give the theory applicable to the scenario.
- Conclusion.
CONTROL - IFRS 10.7:
According to IFRS 10, the investor controls and investee when all of the following three requirements are met:
• Power over the investee:
- It has existing rights
- That give it the current ability
- To direct the relevant activities
• Exposure or rights to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect the amount of the investor’s returns.
SIGNIFICANT INFLUENCE:
JOINT CONTROL:
Fair value – IFRS 9
Consolidation – IFRS 10
Equity method – IAS 28
Equity method – IAS 28
An investor has the power to participate in the financial and operating policy decisions of an
Joint control
Simple investments (equity
investments – IFRS 9)
Significant influence Associate
Joint venture
Subsidiary
Degree of influence of investor Applicable to Accounting method
No influence
Control
- Acquisition of a subsidiary at a discount: Investment > Fair value of asssets and liabilities aquired. {GAIN
FROM A BARGAIN
PURCHASE}
FAC2602:
Theory question:
A GROUP OF ENTITIES:
Account for the assets, liabilities,
revenues and expenses relating
to its interest in a joint
operation in accordance with
, the IFRS applicable to the
particular assets, liabilities,
revenues and expenses – IFRS
11
Joint control Joint operations
A contractually agreed sharing of control of an arrangement, which exists only when decisions
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NCI (Non-controlling interest) can be measured:
- At fair value at the acquisition date, or
- At its proportionate share of the aquiree's net identifiable assets at the acquisition date.
Increase of interest (increase in degree of control) by means of the following:
Decrease of interest (decrease in degree of control) by means of the following:
STEP ACQUISITIONS OF INTERESTS IN INVESTEES
Different scenarios where there is an increase in the degree of control:
(iii) No additional goodwill or gain on bargain purchase is recognised.
(iv) No gain or loss should be recognised in the statement of profit or loss and other
comprehensive income.
2 - Acquisition of an additional interest where an IFRS 9 simple investment becomes a
subsidiary.
- In this case it is important to realise that there is a change In status: control is obtained.
The following steps are taken:
- On the acquisition date, goodwill or gain On bargain purchase is recognised.
DISPOSAL OF INTERESTS IN AN INVESTEE:
Different scenarios where there is a decrease in the degree of control:
1 - Partial disposal of an interest in an existing subsidiary, control not lost (no change
in status):
- No gain or loss should be recognised In the statement of profit or loss and other
comprehensive income.
Additional equity shares in the acquired company are bought from the other investors or from a share issue of
Shares in a subsidiary are sold, but the acquired company still remains a subsidiary, while the parent has a
- On the acquisition date (the date when control is obtained over the investee), remeasure the previously held interest (i.e.
- the difference between the amount that the non-controlling interests are adjusted by and the consideration received by
1 - Acquisition of an additional interest in an existing subsidiary (change in the degree
of control, but not in status where
control has already been obtained)
The carrying amounts of the controlling and non-controlling interests, including any goodwill attributable to the noncontrolling
interests (if applicable), need to be adjusted to reflect the non-controlling interests’ reduced interest in the
subsidiary.
(ii) The difference between the non-controlling interests’ adjustment amount (as discussed
above) and the
consideration transferred by the parent for the additional interest, must be recognised
directly in equity in the change
in ownership reserve.
Methods of change in ownership
BUSINESS COMBINATIONS: (IFRS 3)
The profit or loss on disposal, that was recognised in the parent’s separate financial statements, will be reversed upon
consolidation.
The profit or loss on disposal, that was recognised in the parent’s separate financial statements, will be reversed upon
consolidation.
2 - Partial disposal of an interest in an existing subsidiary, with a simple investment
retained: control is lost (change in
status):
- The total amount of goodwill that arose at acquisition date is not adjusted. However, allocation of goodwill
between the
- a consolidated profit or loss On disposal will be recognised In the consolidated statement of profit or loss and other
- The remaining investment (i.e. the portion of net assets and goodwill retained) is remeasured to fair value on the date
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