Corporate Accounting III
Assignment 2 Question 1: What is the difference between direct and indirect NCI? Under AASB127, the group is required to prepare the consolidation statement when parent entity acquires shares in the subsidiary. There are two parties who own shares in the subsidiary if it’s not a wholly-owned subsidiary consolidation. One is the parent entity while the other is non-controlling interest. Non-controlling interest (NCI) is defined as “the portion of the profit or loss and net assets of a subsidiary attributable to equity interest that are not owned, directly or indirectly through subsidiaries, by the parent” (Leo, et, al. 2009, p. 895). The NCI can be classified as either direct (DNCI) or indirect (INCI).
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To avoid double counting issue arising from continuing giving INCI a share of equity relating to the pre-acquisition assets of the subsidiary, the INCI is only given a share of the post-acquisition equity of the subsidiary. No double counting issue need to be considered again for post-acquisition equity since the investment shares in the subsidiary is recorded at cost, meaning any subsequent changes to the equity of its subsidiary after acquisition date will not be reflected in the shares in the parent. INCI is entitled to the post-acquisition equity once.
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Question 18.6
A. Samoa Ltd Singapore Ltd (75%)
1 Acquisition Analysais: NFV of identifiable net assets of Singapore Ltd: = $5,000 + $1,000 + $20,000 =$26,000 NFV acquired (75%): = $26,000*$26,000 Consideration transferred: =$18,750 Bargain Purchase =$750
1). Pre-acquisition elimination entry :(1/7/05)(75%) Retained earning $3,750 General Reserve $750 Share capital $15,000 Excess $750 Investment in Singapore $18,750
(Retained earning: 75%*$5,000;General Reserve: 75% * $1,000; Share capital: 75% *20,000)
Pre-acquisition elimination entry
Carry Yoki’s Lounge consists of the following. Carry, the owner believed that people would come to hear a band play on Friday, Saturday, and Sunday evening. During the remainder of the week, she believed her customers would watch sporting events on several television sets located throughout the lounge. Carry employed two bartenders, three servers, two assistant servers, two cooks, one dishwasher and a clean-up person. She had a bar, 15 barstools, 4 tables, 40 chairs, 4 television sets, and one satellite dish. She had an oven, stove, grill, refrigerator, sinks, dishes, and glassware. Carry started this business with $50,000 of her own money, and she borrowed $150,000 from the bank. From this
Briefly summarize the key facts you noted in your study of the five components of internal control and the rationale for the conclusions you made in the audit program concerning whether each component was adequately designed and implemented.
This research paper will detail the modified accrual revenue recognition in State and Local Government (SLG) accounting. There will also be discussions on the guidance of governmental fund expenditure recognition, and how it is used in state and local governments. Certainly, there are differences between the fund and the government-wide financial statements, but there are some similarities. Within the paper, it will include the purpose as well as the content of the financial statements. While explaining the government-wide financial statements, the preparation using derived information in the conversion worksheets, will be presented. Lastly, in this research paper, I will explain the elements of a Comprehensive Annual Financial Report (CAFR).
Equitable chose an equity carve-out method for DLJ. This would allow them to retain at least 50% of the equity of the subsidiary, so it could still consolidate its financial statements as well as file a consolidated tax return. An obvious advantage of this method is the parent company doesn’t lose control over its subsidiary. Another advantage of this method and the spin-off method is
g. On December 31, 2012, the company completed the work on a contract for an out-of-province company for $7,900 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction.
Accounting Standards update No. 2016-17, Oct 2016; Interests Held through Related Parties That Are under Common Control, is an amendment to the Consolidations Analysis Update 2015-02. The purpose of this amendment is to provide guidance for consolidation to an entity that is the single decision maker of a variable interest entity (VIE). The Variable Interest entity(VIE) is a term reported by FASB to define an entity in which the controlling interest is held by an investor and is not based on most voting rights. The party that has ownership, contractual, or
of the acquiring corporation . . . , and the acquiring corporation must be in control of the other corporation immediately after the
Jefferson Animal Rescue is a private not-for-profit clinic and shelter for abandoned domesticated animals, chiefly dogs and cats. At the end of 2011, the organization had the following account balances:
Student Cases with Solutions to accompany Accounting & Auditing Research: Tools & Strategies (7th edition)
e. A parent’s less-than-wholly-owned subsidiary issues its shares in exchange for shares of another subsidiary previously owned by the same parent, and the noncontrolling shareholders are not party to the exchange. That is not a business combination from the perspective of the parent.
Costco Wholesale is recognized as the largest wholesale club operator in the US. Over the three-year time period of 2002-2004, this company has expanded its membership base while increasing its number of warehouses both in the U.S. and internationally. In 2004 alone, net sales increased 13.1% over the prior year, driven by an increase in comparable sales of 10% and the opening of twenty new warehouses; net income increased for fiscal 2004 by 22.4%, or $1.85 per diluted share; and for the first time, the Board of Directors declared a quarterly cash dividend, with the company issuing quarterly dividends in the third and fourth quarters of $0.10 per share.
“More specifically, ASC 810-10-25-38 states a reporting entity shall consolidate a VIE when the reporting entity has a variable interest that will absorb a majority of the VIE’s expected losses, received a majority of the VIE’s expected residual returns, or both” (Chan, 2010). Consolidation can even be applicable if both firms remain as separate legal entities/ corporations. In this case, both companies will manage their own financial statements that list only their asset and liability account balances. In addition, the acquiring company will record this business combo under their investment account on their balance sheet while the subsidiary makes no note of this transaction. Therefore, stock is moved from the shareholders of the subsidiary to the parent. However, if the business results in a statutory merger, the firm would be the only one in existence after this acquisition thus the company will have to move all of the aquiree’s net assets into their own financial records since the acquiree is no longer a going concern entity. “On the date of combination, the surviving company records the various account balances from each of the dissolving companies. No further consolidation procedures are necessary since accounts are brought together
Under certain circumstances, ASC 830 obligates that equity must be switched to net income. According to ASC 830-40-1, the circumstances that require this reclassification are “upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity.” Therefore, when dissolving any foreign operation, it is essential to determine if that foreign entity makes up its own foreign entity or is a part of a different overall foreign entity.
The case centers on actual events that occurred in the Roman Catholic Archdiocese of New Orleans from 2001 to 2009. In 2008, the archdiocese announced that it had lost more than $100 million as a result of Hurricane Katrina — because insurance failed to cover all its property losses. Those losses had no bearing on the parish a closure, the church says. Not all the faithful are convinced. Later released prospectus indicated that the Archdiocese paid over $10 million directly from its own assets to settle claims of sexual abuse, and these payments were not part of financial statement or notes. Due to unauthorized expenditure parishioners and media questioned about Good Counsel’s. Good Counsel’s parishioners were very
There are general rules and concepts that preside over the field of accounting. These general rules, known as basic accounting principles and guidelines, shape the groundwork on which more thorough, complex, and legalistic accounting rules are based. The Financial Accounting Standards Board (FASB) uses the basic accounting principles and guidelines as a foundation for their own comprehensive and complete set of accounting rules and standards.