Lecture 3 - Lecture 3 Principles of Consolidation 1...

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1 Lecture 3 Principles of Consolidation
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2 References AGCL Ch 2 AASB 3 AASB 116 AASB 127
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3 Learning Objectives Identify the objectives of a consolidated financial report Outline the basic principles involved in the preparation of consolidated financial statements Understand the significance of pre-acquisition and post-acquisition balances
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4 1.The Objective of Consolidated Statements To show the operating results and the financial position of all the business entities related by control as though they were operating as a single entity The group is the focus
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5 Group Financial Report Preparation Each individual entity within a group prepares separate financial statements . These separate financial statements are then ‘consolidated’. The consolidation process results in a set of group financial statements reflecting the group as a single operating entity.
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6 2. The Process – An Overview Aggregate the line by line information of each entity in the group Eliminate the Investment in Controlled Entity account against the equities acquired Eliminate all inter-entity transactions (including dividends)
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7 The Consolidation Worksheet Exercise 2.1 Adjustments Eagle Ltd Hawk Ltd Debit Credit Group Data Shareholders’ equity Share capital $ 800 $ 550 Retained earnings 450 364 ------- ------- Total shareholders’ equity $1,250 $ 914 ==== ==== Assets Sundry assets $1,531 $1,308 Investment in subsidiary 1,100 Goodwill ------- ------- Total assets $2,631 $1,308 Less liabilities Sundry liabilities 981 394 Debentures payable 400 ------- ------- Net assets $1,250 $ 914 ==== ====
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8 Consolidation Worksheet Adjustments These are recorded in a consolidation journal which is used to support and document the eliminations and adjustments made They are then put onto the worksheet in the eliminations and adjustments columns The Group as a whole has NO BOOKS OF ACCOUNT and
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This note was uploaded on 11/18/2010 for the course ACCOUNTING 22754 taught by Professor Helen during the Three '10 term at University of Technology, Sydney.

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Lecture 3 - Lecture 3 Principles of Consolidation 1...

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