Week09_Discussion_Question_Solutions

Week09_Discussion_Question_Solutions - Week 9 Discussion...

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Week 9 Discussion Questions 20.14t Consolidated balance sheet: Consolidation difference and current period intra-group transactions (Jolley and Carey) Consolidation worksheet at 30 June 20X9: Balance sheet Jolley Carey Sum Eliminations Group Dr Cr Paid-up capital 100 000 40 000 140 000 40 000 1 100 000 Reserves 54 500 2 000 56 500 500 1 56 000 Retained profits 67 500 7 000 74 500 1 400 4 /4t 420 2 500 1 820 2 70 200 Owners’ equity 222 000 49 000 271 000 226 200 Accounts payable 6 000 54 500 60 500 60 500 Bills payable 2 000 2 000 2 000 Loan from Jolley 10 500 10 500 10 500 3 Accumulated goodwill impairment 2 820 820 Total equities and asset contras 230 000 114 000 344 000 289 520 Inventory 50 000 34 000 84 000 4 1 400 82 600 Deferred tax asset 420 4t 420 Loan to Carey 10 500 10 500 3 10 500 Investment in Carey 45 000 45 000 1 45 000 Consolidation difference – goodwill 2 000 1 2 000 Other non-current assets 124 500 80 000 204 500 204 500 Total assets 230 000 114 000 344 000 58 140 58 140 289 520 Elimination 1: Substitution. Elimination 2: Goodwill impairment ($300 + $450 + $70). Elimination 3: Deletes intra-group loan. Elimination 4: Deletes intra-group mark-up in inventory valuation. Elimination 4t: Recognises the tax effect of the difference between group CA and CA of inventory, due to removing the intra-group mark-up in inventory valuation. Comments on application of tax effect: Substitution and goodwill In the chapter we explained that the temporary difference that occurs by the elimination of the parent investment does not give rise to any deferred tax; and the same is true for the
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temporary difference that arises when consolidation goodwill is recognised (AASB 112.15(a)). Both of these are exceptions to the general rule. Intra-group balances Chapter 18 also explained that neither DTA nor DTL is recognised when the elimination of an intra-group transaction raises offsetting temporary differences, because neither of them has a future tax consequence. Impairment of consolidation goodwill The impairment of consolidation goodwill, for which there is no allowable deduction, does not cause a reduction in the amount of a DTL. The temporary difference caused by the recognition of goodwill, which has a tax base of zero, does not result in the recognition of a DTL, therefore the subsequent impairment cannot – as a matter of logic – have a tax effect because it is ‘regarded as arising from the initial recognition of goodwill’ (AASB 112.15(b) and 21A). Mark-up of inventory in intra-group transfers – current period exchange
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This note was uploaded on 10/25/2011 for the course ACCT 5942 taught by Professor Diane during the Three '11 term at University of New South Wales.

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Week09_Discussion_Question_Solutions - Week 9 Discussion...

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