Advanced financial accounting - Lecture 37: Group accounts
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Advanced Financial
Accounting
Lec-37
Group Accounts
Control
Control is the power to govern the
financial and operating policies of an
entity so as to obtain benefits from its
activities.
Control
1. The parent company has owned more than 50% of
subsidiary company (Each ordinary share capital has
one voting right).
2. The parent company has power over more than 50% of
the voting rights of subsidiary company by virtue of
agreement with other shareholders of it.
3. The parent company has power to govern the financial
and operating policies of subsidiary company by statute
or under an agreement.
4. The parent company has power to appoint or remove a
majority of the directors of subsidiary company.
5. The parent company has power to cast the majority of
votes at meetings of the board of directors of subsidiary
company.
Consolidated Accounts
1.
2.
Consolidated balance-sheet.
Consolidated income statement.
Assets = Owner’s equity + Liabilities
Owner’s Equity
1. Share capital.
2. Reserves.
Assets
1. Current assets.
2. Non current assets.
Liabilities
1. Current liabilities.
2. Non current liabilities.
Question
Balance sheet
As on 31 Dec. 2008
P (Rs)
S (Rs)
Fixed assets
1,000
400
Investment in S
500
----
Current assets
400
200
Total Assets
600
1,900
Share capital
300
1,200
Reserves
500
200
Current liabilities
200
100
1,900
600
Total liabilities & capital
Question
The parent Co. (P) acquired 100% shares of the subsidiary Co. (S) on 31st
December 2008.
Required: Prepare the Consolidated Balance Sheet as on the same date.
Solution
Consolidated Balance Sheet
As at December 2008
(Rs)
Fixed assets
Current assets
1,400
600
Total assets
2,000
Share capital
1,200
Reserves
500
Current liabilities
300
Total liabilities & capital
2,000
Question
Balance Sheet
As on 31st December 2008
P (Rs)
Fixed assets
S (Rs)
1,000
400
Investment in S
500
----
current assets
400
200
Total Assets
1,900
600
Share capital
1,200
300
Reserves
500
150
Current liabilities
200
150
1,900
600
Total liabilities & capital
The parent Co. (P) acquired 100% shares of the subsidiary Co. (S) on
31st December 2008.
Required: Prepare the Consolidated Balance Sheet as on the same
date.
Solution
Consolidated Balance Sheet
As at December 2008
(Rs)
Fixed assets
Goodwill
Current Assets
1,400
50
600
Total assets
2,050
Share capital
1,200
Reserves
500
Current liabilities
350
Total liabilities &
capital
2,050
Goodwill
Cost of investment
Net assets of S Co.
Acquired
Goodwill
500
(450)
50
