Understanding and Preparation of Consolidated Accounts

Understanding and Preparation of Consolidated Accounts

16 & 17 February 2009, Kuala Lumpur

Introduction

Consolidation and preparation of Group financial statements have always been perceived as a complex and difficult task.  The introduction of new financial reporting standards has made significant changes in the treatment and disclosure of consolidation issues.

“Theory without practice is blind” and so this seminar will highlight the areas of difficulty with many practical examples so that the principles are more easily understood.  Group financial statements have also been the subject of much controversy and participants will be able to appreciate the reasons for the controversial issues arising.

Main Objective

The main objective of this seminar is to present fairly detailed information on the principles and practice of consolidation including the calculation of pre acquisition and post acquisition profits, positive and negative goodwill, piecemeal acquisitions, reverse acquisitions, disposals of subsidiaries and compliance with Financial Reporting Standards (”FRS”) FRS 3 - Business Combinations and FRS 127 - Consolidated and Separate Financial Statements.

Learning Outcomes

Participants will be able to:-

• understand the basic principles of consolidation
• treatment of positive and negative goodwill
• draw up a full set of consolidated financial statements
• gain a fair understanding of the principles of piecemeal acquisitions
• the principles of de-consolidating a subsidiary that is disposed
  

COURSE CONTENTS

UNDERSTANDING THE COMPONENTS OF CONSOLIDATION

Key Definitions:-

• Group
• Parent Companies,
• Subsidiary Companies
• Sub-Subsidiary Companies,
• Associated Companies
• Control
• Jointly Controlled Entities
• Joint Ventures
• Related Corporations

Equity method of accounting

Proportionate Consolidation

Minority Interests

Identification of Subsidiaries

Presentation of Consolidated Financial Statements

Consolidation Principles and Procedures:

• Acquisition of subsidiaries
• Piecemeal (step by step) acquisition of subsidiaries
• Pre-acquisition and post-acquisition profits or losses
• Consolidation adjustments, current year adjustments and brought forward adjustments
• Positive and negative goodwill
• Intragroup balances
• Intragroup transactions
• Elimination of Intragroup profits
• Intragroup income and expenses
• Calculation of minority interests
• Treatment of intragroup losses which indicate impairment loss on related asset
• Same reporting dates to be used
• If impracticable to have same reporting dates, what needs to be done
• Uniform accounting policies to be used within group
• Minority interests - treatment in balance sheet and in income statement
• Treatment of losses attributable to minority interests in excess of their nominal value of shares
• Disposal of subsidiaries, including partial disposals
• Reverse acquisitions

Examples will be used as illustration to facilitate the understanding of the consolidation principles and procedures

Disclosures in Group and Company Financial Statements:-

• Nature of relationship between parent and a subsidiary when the parent does not own, directly or indirectly through subsidiaries, more than half of the voting powers
• The reasons why the ownership, directly or indirectly through subsidiaries of more than half of the voting power does not constitute control
• Where the reporting date of the financial statements of a subsidiary are different from the parent, the reasons for using the different reporting date or reporting period
• The nature and extent of any significant restrictions on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans and advances
• Parent company - list of investments in subsidiaries, jointly controlled entities and associated companies, stating name, country of incorporation or residence, proportion of shares held, nature of business of each of the subsidiaries

Treatment of Goodwill

• On acquisition of the subsidiaries - values used
• In the next financial period or sooner if necessary - on fair values
• How subsequent fair value of goodwill on acquisition is determined

A review of the Financial Reporting Standards:-

• FRS 3     - Business Combinations
• FRS 127 - Consolidated and Separate Financial Statements
• FRS 128 - Investments in Associates
• FRS 131 - Financial Reporting of Interests in Joint Venture

A complete worked sample “OA Consolidated Bhd” based on an actual company (with numbers and names changed), will be used as one of the examples throughout this training.

More information at: www.arrow-training.com.my