Exam 32: Further Consolidation Issues Iv: Accounting for Changes in the Deg

Once control over a subsidiary has been lost,the parent entity must derecognise the individual assets,liabilities and equity including any non-controlling interest relating to that subsidiary.

Under the step-by-step method,the aggregate costs of the investments would be eliminated against the parent's share of capital and reserves at the date control of the subsidiary has been ultimately established and only one amount of goodwill (or bargain gain on purchase)is calculated.

Mickey Ltd acquired a 70 per cent interest in Mouse Ltd on 1 July 2003 for a cash consideration of $1,700,000.At that date the shareholders' funds of Mouse Ltd were: The assets of Mouse Ltd were recorded at fair value at the time of the purchase. On 1 July 2005 Mickey Ltd purchased a further 20 per cent of the issued capital of Mouse Ltd for a cash consideration of $530,000.At this date the fair value of the net assets of Mouse Ltd were represented by: Impairment of goodwill was assessed at $9,000; of which $5,000 relates to the current period.There were no intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary and account for goodwill for the period ended 30 June 2006?

An immediate parent entity may purchase shares in its subsidiary in separate transactions with long periods of time between transactions.It is possible that one transaction may give rise to goodwill on consolidation and another to an excess.How would the excess on consolidation be calculated and treated in the consolidated accounts?

On 1 July 2002,City Ltd acquired 65 per cent of the issued capital of Town Ltd for $850,000 when the fair value of the net assets of Town Ltd was $1.2 million (share capital $1 million and retained earnings $0.2 million).On 30 June 2005 City Ltd purchased a further 25 per cent of Town's issued capital for $300,000.The net assets of Town Ltd were not stated at fair value in the accounts,which are summarised as follows: The fair value of the plant and equipment is $1,090,000 at year end.Goodwill has been deemed not to have been impaired.There were no inter-company transactions during the period. What are the consolidation journal entries required for the period ended 30 June 2005? (Ignore the tax effect of the revaluation)

Star Trek Ltd acquires shares in Vulcan Ltd at various stages summarised as follows: Which of the following statements is not? in accordance with AASB 127 "Consolidated Financial Statements"?

The required method (according to AASB 3)of accounting for the acquisition of additional shares in a subsidiary is the single-date method.

Hill Ltd acquired an 80 per cent interest in Dale Ltd on 1 July 2004 for a cash consideration of $1,200,000.At that date the shareholders' funds of Dale Ltd were: The assets of Dale Ltd were recorded at fair value at the time of the purchase. On 1 July 2005 Hill Ltd purchased the remaining 20 per cent of the issued capital of Dale Ltd for a cash consideration of $336,000.At this date the fair value of the net assets of Dale Ltd were represented by: Impairment of goodwill amounted to $35,600; $16,000 of which related to the year ended 30 June 2006.There were no inter-company transactions.What are the consolidation entries to eliminate the investment in the subsidiary and account for goodwill for the period ended 30 June 2006?

When shares in a subsidiary are sold during a period,any income and expenses recorded in the consolidated accounts that relate to the subsidiary,are eliminated.

Spock Ltd acquired a 10 per cent holding in Kirk Ltd on 1 July 2011 for $350,000 cash,being the fair value of consideration transferred. On 30 June 2012,Spock Ltd acquired a further 75 per cent of the contributed capital of Kirk Ltd for $3,300,000,which represents the fair value of consideration transferred.After the latest acquisition,Spock Ltd gained control of Kirk Ltd.The fair value of the net assets acquired and the liabilities assumed of Kirk Ltd at the acquisition date of 30 June 2012 was $3,500,000 and all assets were recorded at far value in the financial statements of Kirk Ltd. At that date fair value of the net assets of Kirk Ltd were represented by: Goodwill is also attributed to the non-controlling interest. What is the consolidation entry to eliminate the investment in Kirk Ltd on consolidation for the financial year ended 30 June 2012?

Where a parent entity with a controlling interest in a subsidiary obtains additional equity,the carrying amounts of the controlling and non-controlling interests should be adjusted to reflect the changes in their relative interests in the subsidiary.Any difference between the fair value paid and the carrying amount of the additional interest acquired is recognised directly in profit or loss of the parent entity.

In a business combination achieved in stages,the acquirer shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss,if any,in equity.

The profit or loss on the sale of shares in a subsidiary will be reported in both the books of the parent legal entity and the consolidated accounts.The method of calculating the profit or loss in the parent's individual legal entity books is to:

When a parent sells its interest in a subsidiary,any profit or loss generated by the subsidiary:

The consolidated balance sheet at year-end,in a period when the parent sold its interests in a subsidiary:

Which of the following is not a reason for a parent to lose control of a subsidiary?

The following consolidation adjusting journal entries appeared at the end of a period in which the parent sold all of its shareholding in a subsidiary.It received $1,200,000 for the shares. The 'Cr Profit after tax' entry above represents:

Under the single-date method,goodwill would be recognised.

Additional purchases of shares in a subsidiary should be accounted for by the combined tranche method,according to AASB 3: