合并报表会计-合并各方间交易

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1、1Consolidation 22The need for adjustmentsAASB 127:2 types of adjustments are needed:(i)the substitution elimination entry(eliminating“Shares in S Ltd”)(ii)entries that eliminate the effects of inter-entity transactions such as-inter-entity services,sale of inventory and depreciable assetsinter-entit

2、y borrowingsinter-entity dividends3The need for adjustmentsThe purpose of consolidate financial statements is to provide information of dealings with external parties only.Hence the effects of the transactions within the group must be adjusted.AASB 127 para 24“Intragroup balances,transactions,income

3、 and expenses shall be eliminated.”4The need for adjustmentsnAASB127 para 26nThe financial statements of the parent and its subsidiaries shall be prepared as of the same reporting date.nWhen different the subsidiary must prepare additional financial statements as of the same date as the parent.5The

4、need for adjustments Any profits made on inter-entity transactions must be eliminated because,from a group viewpoint,they are unrealised profits.Each group asset must be shown at its cost to the group(which may be different to the cost recorded by the entity within the group that currently owns the

5、asset).6The need for adjustments Each group liability must represent an obligation to an entity outside the groupWe may have to adjust for the effects of prior period transactions as well as current period transactions.This is because consolidation adjustment entries are applied in a worksheet only

6、and not in the accounts of either the parent or any of its subsidiaries.7The need for adjustmentsWhen items of stock are sold within the group(e.g.P to S,or S to P)any profit made on the sale must be eliminated.The unrealised profits on these internal sales will distort stock levels in dollar terms.

7、We will eliminate these unrealised profits by means of adjustments to opening and closing stock amounts.8The need for adjustmentsUnrealised profits on internal sales become realised group profits if and when the item that was sold internally passes to a buyer outside the group.When this occurs the g

8、roup will record sales revenue and the cost to the group of what was sold(COGS).9Example:P sold an item of stock to S for$100 cash.Assume that this sale was at cost,so no profit was recognised by P.In the books of P:Dr Bank100Cr Sales*100In the books of S:Dr Purchases*100Cr Bank100*Group effectInven

9、tory adjustments10Inventory adjustments The final effect of this sale from a group viewpoint is:Dr Purchases 100Cr Sales100To reverse this effect and so avoid overstating group sales and purchases:Dr Sales100Cr Purchases100This entry has no effect on group profit.11Inventory adjustments How is gross

10、 profit calculated?To reduce Cr SALES REVENUE Dr profit Dr -COGS Cr profit =GROSS PROFIT12Inventory adjustments How is cost of goods sold calculated?To reduceDr opening stock CrDr +purchases CrCr -closing stock DrDr =cost of goods sold CrReducing opening stock increases profitReducing closing stock

11、reduces profit13Inventory adjustmentsAdjustment entries may affect asset and liability balances e.g.transfer of inventory at a profit.Where carrying amounts differ from tax base,tax-effect must be considered.The legal entitys records consider the differences between the tax base and the carrying amo

12、unt in the legal entity.On consolidation,it is the change in the carrying amount that affect this relationship and requires adjustment.14Inventory adjustmentsExample:If Sub Ltd carries an asset at$100 and the tax base of the asset is$80,Sub Ltd will raise a deferred tax liability of 30%x$20.If on co

13、nsolidation an adjustment is made to reduce the asset to$90,the carrying amount to the economic entity,the deferred tax liability must be reduced by 30%x$10.Combining the legal entities records and the consolidation adjustment results in the economic entitys position being shown in the consolidated

14、financial statements.15Inventory adjustmentsAt 1/7/00,Parent Ltd sells inventory to Sub Ltd for$1 000 at a profit before tax of$200.Tax rate is 30%.All inventory is unsold at 30/6/01.RECORDED POSITIONParent Ltd:Sub Ltd:Sales of$1 000Inventory at$1 000Cost of sales of$800Profit of$200Income tax expen

15、se of$6016Inventory adjustmentsECONOMIC ENTITY POSITIONnNo sales to external partiesnNo cost of sales to external partiesnNo profit on sale of inventory to external partiesnCost of inventory at 30/6/01 is$80017Inventory adjustmentsCONSOLIDATION WORKSHEET ADJUSTMENTSalesDr1 000Cost of SalesCr800Inven

16、tory Cr200Deferred Tax Asset Dr60Income Tax ExpenseCr60*Carrying amount of inventory is reduced from$1 000 to$800.CATB by$200.(DTA of$200 x 0.3)18Inventory adjustmentsAssume all the transferred inventory is sold by Sub Ltd externally for$1 200 by 30/6/01.RECORDED POSITION Parent SubTotalSales 1 0001

17、 2002 200Cost of sales 800 1 0001 800Profit 200 200 400Tax expense 60 60 12019Inventory adjustmentsECONOMIC ENTITY POSITIONSales of$1 200 to external partyCost of sales of$800 from external partyProfit of$400Tax expense of$120CONSOLIDATION WORKSHEET ADJUSTMENTSalesDr1 000Cost of SalesCr1 00020Invent

18、ory adjustmentsAssume at 30/6/01 that S Ltd has sold 75%of the inventory externally for$900.That is there is ending inventory containing unrealised profit of$50 i.e.25%x$200.RECORDED POSITIONParentSubTotalSales$1000$900$1 900Cost of sales 800 750 1 550Inventory -250 25021Inventory adjustmentsECONOMI

19、C ENTITY POSITIONSales$900Cost of sales600 i.e.75%x$800Inventory200 i.e.25%x$800CONSOLIDATION WORKSHEET ADJUSTMENTSalesDr1000Cost of SalesCr950Inventory*Cr50*Note:this is 25%x profit of$200.Net result is to decrease group profit by$50.22Inventory adjustmentsAs inventory is being reduced by$50,a tax-

20、effect entry is required as CATB by$50:Deferred Tax AssetDr15Income Tax ExpenseCr15The deferred tax asset is reversed when the inventory is sold externally.23Inventory adjustmentsAt 1/7/01,inventory containing unrealised profit of$50 remains on hand.In the consolidation worksheet for 2001-02:Retaine

21、d Profits(1/7/01)Dr35Income Tax Expense*Dr15Cost of Sales*Cr50nS Ltd records cost of sales of$250,the economic entity would record$200.nResult is that this years group profit will increase by$50 before tax.24Depreciable assetsOn 1/7/00,Parent Ltd sells plant to Sub Ltd for$1 000.It had a carrying am

22、ount in Parent Ltd of$800.Depreciation is 10%p.a.RECORDED POSITION Sale of assetParentSubRevenue$1 000Plant$1 000Carrying amount of asset sold$800Income tax expense6025Depreciable assetsECONOMIC ENTITY POSITIONNo salePlant held at cost of$800CONSOLIDATION WORKSHEET ADJUSTMENTRevenue ProceedsDr1 000C

23、arrying Amount of Plant SoldCr800PlantCr20026Depreciable assetsAs carrying amount of asset has been reduced on consolidation by$200,then CATB or view it as group profit decreasing by$200:Deferred Tax AssetDr 60Income Tax ExpenseCr60REALISATION OF PROFITNo external party involvedProfit is realised as

24、 asset is consumed measured by reference to depreciation27Depreciable assetsDepreciation:Sub Ltd depreciates plant at 10%p.a.on cost of$1 000 i.e.$100The economic entity charges depreciation at 10%p.a.on cost of$800 i.e$80CONSOLIDATION WORKSHEET ADJUSTMENTAccumulated DepreciationDr20Depreciation Exp

25、enseCr20Income Tax Expense Dr6Deferred Tax Asset Cr628Depreciable assetsSUBSEQUENT PERIODS-AS ASSET REMAINS ON HANDCONSOLIDATION WORKSHEET ADJUSTMENTSALE OF ASSETRetained Profits(1/7/01)Dr140Deferred Tax AssetDr60PlantCr200Profit is still considered to be unrealised29Depreciable assetsAccumulated De

26、preciationDr40Depreciation Expense Cr20Retained Profits(1/7/01)Cr20Income Tax ExpenseDr6Retained Profits(1/7/01)Dr6Deferred Tax AssetCr1230Intragroup servicesnSome examples of services between related entities includenLending of specialist personnel for limited periods of timenOne entity may lease o

27、r rent an item of plant or warehouse from the othernA subsidiary may exist solely for the purpose of carrying out some specific task31Intragroup servicesnS Ltd paid$30,000 to P Ltd for the services of a specialist employeenIn P LtdCashDr30,000Service Revenue Cr30,000nIn S LtdService ExpenseDr 30,000

28、CashCr30,000nConsolidation adjustment entryServices RevenueDr30,000Services ExpenseCr30,00032Intragroup Borrowing RECORDED POSITIONParent LtdLoan to S Ltd(asset)$1 000Interest revenue 70Subsidiary LtdLoan from P Ltd(liability)$1 000Interest expense 70At 1/7/03 P Ltd lends$1 000 to S Ltd.Interest pai

29、d at 30/6/04 is$70.33Intragroup BorrowingECONOMIC ENTITY POSITIONNo loan asset,no loan liability,no revenue,no expense because no external party was involvedCONSOLIDATION WORKSHEET ADJUSTMENTSDr Loan from P Ltd1 000Cr Loan to S Ltd1000Dr Interest revenue 70Cr Interest expense 70No tax effect34Intrag

30、roup dividends from post acquisition profitsn From a group viewpoint internal dividends are simply transfers of cash from one part of the group to another.n“Post-acquisition”dividends are those paid from profits earned after P Ltds acquisition of S Ltd.n P will never pay dividends to S.Why?Because S

31、 cannot legally own shares in its own parent company.35Intragroup dividends from post-acquisition profitsDIVIDEND WAS PAID IN CURRENT PERIODRECORDED POSITIONParent Ltd Subsidiary LtdDividend revenue$1 000 Interim div.$1000ECONOMIC ENTITY POSITIONNo dividend was paid to or received from an external p

32、artyY Ltd paid a$1 000 dividend to X Ltd on 1/1/03.36Intragroup dividends from post-acquisition profitsCONSOLIDATION WORKSHEETDr Dividend revenue1 000Cr Interim dividend 1 00037Intragroup dividends from post-acquisition profitsRECORDED POSITIONSubsidiary Ltd:Proposed final dividend and dividend paya

33、ble of$1 500Parent Ltd:Dividend receivable and dividend revenue of$1 500ECONOMIC ENTITY POSITIONNo external party involved no dividendsAt 30/6/03 Subsidiary Ltd provided for a$1 500 final dividend.38Intragroup dividends from post-acquisition profitsCONSOLIDATION WORKSHEETDr Dividend revenue1 500Cr Dividend receivable 1 500Dr Dividend payable1 500Cr Proposed final dividend 1 500