18.3 Which entities must prepare consolidated financial statements? Consolidated financial statements are required when AASB 10(paragraph Aus4.2): The ultimate Australian parent shall present consolidated financial statements that consolidate its investments in subsidiaries in accordance with this Standard when either the parent or the group is a reporting entity or both the parent and the group are reporting entities. 19.1 The consolidation process Consolidation involves adding together the financial statements of the parent and subsidiaries and making a number of adjustments . The acquisition analysis sets up the adjustments for: Business combination valuation entries – required to adjust the carrying amount of the identifiable assets acquired and the liabilities assumed of the subsidiary to fair value . – i.e. A buy B, adjusting B assets from book value to fair value. Pre-acquisitions entries 23 Chapter 19 Consolidation: wholly owned subsidiaries 19.3 prepare an acquisition analysis for the parent’s acquisition in a subsidiary Important 19.4 prepare the worksheet entries at the acquisition date , being the business combination valuation entries and the pre-acquisition entries Important 19.5 prepare the worksheet entries in periods subsequent to the acquisition date , including the effects of asset disposals, depreciation or liability settlement and transfers from pre-acquisition equity Important
– required to eliminate the carrying amount of the parent’s investment in each subsidiary against 对照 the pre-acquisition equity of that subsidiary . 19.2 Consolidation worksheets To facilitate the adjustment process a consolidation worksheet is used. An acquisition analysis compares the cost of acquisition (consideration) with the FVINA and contingent liabilities that exist at acquisition to determine whether there is: Goodwill on acquisition (where cost > FVINA ) Bargain purchase (where cost < FVINA ) Goodwill is an asset : it represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and recognised. Net assets = Assets – Liabilities = Shareholders equity The fair value of the identifiable net assets The FVINA includes: All identifiable asset and liabilities of the subsidiary , and the fair value of any contingent liabilities the acquiree may have. We commonly determine the FVINA with reference to the equity balances of the subsidiary , rather than the individual asset and liability balances . Acquisition analysis example A Ltd acquired all of the issued share capital of B Ltd on 30/6/16 for a cash consideration $400k . At that time the net assets of B Ltd were represented as follows: 24 Help to understand 如果两个公司存在“ Control” 的关系，那么这两个公司就是母子公司的关系，然后就要从“ Group” 的角度把母子 公司的财务报表进行合并，出具最终的合并报表 ( 将母公司和子公司的两份独立财报合二为一 ) 。在现实生活中，
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