MAA363 Lecture Notes - Lecture 8: Financial Statement, Share Capital, Retained Earnings
Document Summary
Where a reporting entity (parent) controls another entity (subsidiary), aasb 10 requires the parent company to prepare consolidated financial statements. Consolidation concepts: entity concept, proprietary concept, parent entity concept. To show financial statements of a group as if were operating as a single economic entity. Helps external users make well informed decisions. The consolidation process: three steps: revaluation of assets and subsidiaries. If they (cid:449)eren"t stated at fair (cid:448)alue: pre-acquisition entry, elimination of investment in subsidiary and recognition of goodwill/bargain on purchase and goodwill impairment, eliminations and adjustments of. Intragroup balances and transactions including dividends, services, borrowings, sale of inventory and sale of non-current assets. Where the subsidiary has not adopted the revaluation model of non-current assets to fair value, the following adjustments must be made: close off accumulated depreciation. Cr asset: revaluation of asset to fair value. Cr accumulated depreciation: adjustment for tax effect of depreciation.
