...Consolidation of Variable Interest Entities) further interprets how to apply the controlling financial interest criterion. This model is known as the “variable interest model” and entities subject to this model are referred to as “variable interest entities” (VIEs). VIEs include entities that have been referred to as special-purpose entities, as well as other entities that are structured in such a way that (a) the equity investment at risk is not sufficient to permit the entity to finance itself or (b) the equity investors at risk as a group lack decision-making powers (or non-substantive voting rights), do not absorb the expected losses, or do not receive the expected residual returns. Prior to consolidating an entity under the voting control model, a company must first look to ASC 810-10 to determine whether the entity is a VIE that should be evaluated for consolidation under the VIE model. As a result, every entity should be carefully analyzed to determine whether it is a VIE or a VOE in order to determine the appropriate model for evaluating which party may have the controlling financial interest. ASC 946 FASB AS Update 2009-16 FASB AS Update 2009-17 IFRS 10, Consolidated Financial Statements IFRS 10 establishes a single control model which applies to all entities and will require management to exercise significant judgment to determine which entities are controlled, and therefore are required to be consolidated by a parent, compared with the requirements which were in...
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...IN FOCUS LEARNING OBJECTIVES IFRS 10 Consolidated Financial Statements After studying this chapter, you should be able to: 1 explain the meaning of consolidated financial statements 2 discuss the meaning and application of the criterion of control 3 discuss which entities should prepare consolidated financial statements 4 understand the relationship between a parent and an acquirer in a business combination 5 explain the differences in disclosure requirements between single entities and consolidated entities. CHAPTER 23 Consolidation: controlled entities Prepared for Rotterdam School of Management 429 813 INTRODUCTION The purpose of this chapter is to discuss the preparation of a single set of financial statements, referred to as the consolidated financial statements. The preparation of consolidated financial statements involves combining the financial statements of the individual entities in a group so that they show the financial position and financial performance of the group of entities, presented as if they were a single economic entity. The first issue covered in this chapter is the determination of which entities are required to prepare consolidated financial statements. This involves a discussion of the criterion for consolidation and its application to economic situations. The second issue in this chapter is the accounting procedures for preparing the consolidated financial statements. The application in this chapter is to a very...
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...[pic]\ Table of Contents 1….……………………………………….. Title Page 2…………………………………………….Contents 3….…………………………………………Introduction 4....…………………………………………Firm’s auditors and opinion on financial statement 5……………………………………………Subsequent events 6……………………………………………Total assets and liabilities trends 7...………………………………………….Company’s three largest assets for most recent year 8..…………………………………………. Company’s three largest liabilities for most recent year 9...…………………………………………. Stock type and outstanding shares 10…..……………………………………….. Type of income statement 11…..……………………………………….Contents of income statements 12……………………………………………Net Income Trends for over year presented 13……...……………………………………Other comprehensive income and transaction Nature 14……………………………………………Type of Cash flow method use 15……………………………………………Operation Cash trend for year presented 16...………………………………………….Largest items included in cash from investing activities 17…………………………………………….Reference Introduction I chose to analyze the financial statement of Morgan Stanley for year 2010 to 2013. They are one of the world's largest diversified financial services companies since 1935, with a reputation for excellence in advice and execution on a global scale, there are in a position for positive growth. Morgan Stanley provides a wide range of investment banking, such as security transactions, investment management and wealth...
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...Proposed Statement of Financial Accounting Concepts Issued: March 11, 2010 Comments Due: July 16, 2010 Conceptual Framework for Financial Reporting: The Reporting Entity This Exposure Draft of a proposed Statement of Financial Accounting Concepts is issued by the Board for public comment. Written comments should be addressed to: Technical Director File Reference No. 1770-100 Responses from interested parties wishing to comment on the Exposure Draft must be received in writing by July 16, 2010. Interested parties should submit their comments by email to director@fasb.org, File Reference No. 1770-100. Those without email may send their comments to the “Technical Director, File Reference No. 1770-100, FASB, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116.” Do not send responses by fax. Please send only one comment letter to either the FASB or the International Accounting Standards Board (IASB), which is also requesting comments on this jointly issued Exposure Draft. The FASB and the IASB will share and consider jointly all comment letters received. Comments are most helpful if they: a. b. c. Indicate the specific paragraph or paragraphs to which the comments relate Contain a clear rationale Include any alternative the Boards should consider. All comments received constitute part of the FASB’s public file. The FASB will make all comments publicly available by posting them to its website and by making them available in its public reference room in Norwalk, Connecticut. An...
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...accounting theories and their developments. I will also argue entity and proprietary theory and how they have contributed to the development of existing accounting practices. I will also highlight the strengths and weakness of the two theories and the impact it has on current accounting practices. Accounting theories can be said to be a process of reasoning problems by means of distinguishing the basic relationship, which in turn simplifies the issues to a generalized form that is easy to understand. Accounting theories are a coherent set of hypothetical, conceptual and pragmatic principles forming the general framework of reference for a field of inquiry (Hendriksen). Theories are words or other symbols made in a statement and do not have a physical form and can also be said to be a set of logical reasoning in the form of a set of broad principles that has two important functions. Fist they provide a general framework of reference by which accounting practice can be evaluated and secondly guide the development of new practices and procedures (Hendriksen). These two definitions of accounting theory underpin the use of theory as a guide to accounting practices. While looking at the Entity and Proprietary theory, it is important to note that the main difference between the two theories is that under the proprietary theory transaction are recorded, assets are valued and account statements are prepared in the view point of the proprietor. However under entity theory these actions...
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...Possible Problem/Essay Topics Chapter 1 1) Determining amount of goodwill during an acquisition (problem that includes Figure 1-3 on page 19) * Components used in determining goodwill: * The fair value of the consideration given by the acquirer * The fair value of any interest in the acquiree already held by the acquirer * The fair value of the noncontrolling interest in the acquiree, if any * The total of these three amounts, all measured at the acquisition date, and is compared with the acquisition-date fair value of the acquiree’s net identifiable assets, and the difference is goodwill. * Establishes A New Basis of Accounting * The new basis of accounting depends on the acquirer’s purchase price (FMV) + the NCI’s (FMV). * The depreciation cycle for fixed assets starts over based on current values and estimates. * If acquisition price > FMV, goodwill exists. * Recognize as an asset. * Do not amortize. * Evaluate periodically for possible impairment. * If acquisition price < FMV, a bargain purchase element (formerly called “negative goodwill”) exists. * Testing for goodwill impairment * When goodwill arises in a business combination, it must be assigned to individual reporting units. * To test for impairment, the fair value of the reporting unit is compared with its carrying amount. * If the fair value of the reporting unit exceeds its carrying amount, the goodwill of...
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...description of the major points covered in each case and problem. CASES Case 5-1 In this case, students must discuss how to value employees and patentable products and how these assets should be amortized or checked for impairment on an annual basis. Case 5-2 (prepared by Peter Secord, Saint Mary’s University) In this real life business combination, students are directed to identify all of the intangible assets acquired and to discuss the valuation problems associated with them. Case 5-3 In this case, adapted from a CA exam, students are asked to determine appropriate accounting policies relating to a restructuring of a real estate company. A special purpose balance sheet needs to be prepared that reports all assets and liabilities at fair value. Case 5-4 In this case, adapted from a CA exam, students are asked to provide advice in managing a new company providing warranties for new homes. Students must also recommend appropriate accounting policies relating to revenue recognition, warranty obligations and a business combination involving some unique factors in allocating the acquisition cost. Case 5-5 In this real life case, students are asked to provide advice in resolving a salary dispute for a hockey team. The owner of the hockey team states that he cannot afford the demands from the union. However, consolidated statements are not being prepared for the combined operations of the hockey team and Stadium, which is a subsidiary of the hockey team...
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...amortization. C. A worksheet and consolidation entries continue to provide structure for the rendering of a single set of financial statements for the combined entity. D. When a time factor is included in the consolidation process, additional complications are encountered. 1. The parent must select and apply an accounting method to cover the relationship between the two companies. The investment balance recorded by the parent varies over time as a result of the method chosen, as does the income consequently recognized. 2. The parent’s investment balance is eliminated on the worksheet so that the subsidiary’s actual assets and liabilities can be consolidated. 3. Additionally, the income figure accrued by the parent is excluded each period so that the subsidiary’s revenues and expenses can be included can be included when creating an income statement for the combined entity. II. Investment Accounting by the Acquiring Company A. Consolidation of a subsidiary becomes necessary for external reporting whenever control exists; but, for internal record-keeping, the parent has a choice of three alternatives for monitoring the activities of its subsidiaries: 1. the cost method, 2. the...
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...Introduction 1 1.1 Economics of F&N Holdings Berhad 1 2.0 The Users of Financial Statements and Their Information Needs 4 3.0 Discussion of Standards Related to Consolidation and its Actual Presentation 6 4.0 Conclusion 14 Reference 16 List of Diagrams Exhibit 1 Group Structure & Summary of Ownership Interests in Subsidiary Exhibit 2(a) Disclosure of Ownership Interest in Subsidiaries Exhibit 2(b) Disclosure of Ownership Interest in Subsidiaries Exhibit 3 Consolidated and Separate SOPL Exhibit 4 Consolidated and Separate Statements of Comprehensive Income Exhibit 5(a) Consolidated SOFP Exhibit 5(b) Separate SOFP Exhibit 6 Consolidated SOCIE Exhibit 7 Separate SOCIE Exhibit 8 Consolidated and Separate SOCF Exhibit 9 Disclosure about Reporting Date Exhibit 10 Acquisition Method of Business Combinations Exhibit 11 Comparisons of Investment in Subsidiaries of 2 years Exhibit 12 Goodwill as Intangible Assets and Computations Exhibit 13(a) Goodwill Recognized on Acquisition Date Exhibit 14 Goodwill shown in Intangible Assets Exhibit 15 Investment in A Joint Venture Exhibit 16 Equity Method of Joint Venture Exhibit 17 Adjustments to CSOFP for MFRS 11 Adoption Exhibit 18 Adjustments to CSOCIE & CSOCF for MFRS 11 Adoption Exhibit 19 Adjustments to SOFP, and SOCF for MFRS 11 Adoption Exhibit 20 Summary of Financial Information...
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...CGA-CANADA FINANCIAL ACCOUNTING: CONSOLIDATIONS & ADVANCED ISSUES [FA4] EXAMINATION June 2014 Marks Notes: 1. 2. 3. 4. 5. 6. 7. All calculations must be shown in an orderly manner to obtain part marks. Round all calculations to the nearest dollar. Narratives for journal entries are not required unless specifically requested. Assume a December 31 fiscal year end unless specifically stated otherwise. Assume all amounts are material unless directed otherwise. Assume all companies are public companies unless otherwise noted. Assume all companies use the fair value enterprise method unless otherwise stated. Time: 4 Hours 30 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. The International Accounting Standards Board has issued more than 50 accounting standards. Which of the following statements is false with respect to these standards? 1) Member countries must comply with these standards. 2) Many countries, including Canada, have adopted these standards for use by companies listed on stock exchanges in their own countries. 3) Some of the standards allow a choice in accounting...
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...9-193-029 REV: SEPTEMBER 13, 2004 WILLIAM BRUNS Introduction to Financial Ratios and Financial Statement Analysis There is almost always a reason why someone picks up an organization’s financial statements and begins to analyze them. Lenders or creditors may be interested in determining whether they will be repaid money they have lent or may lend to the organization. Investors may be interested in comparing a potential investment in one organization with that of another. Employees may want to compare the current performance or financial status of their employer with earlier periods. Regulatory agencies often need to assess organizational or industry financial health and performance. Financial analysis is always based on a set of questions, and the specific questions requiring answers depend on who the financial statement user is and the reasons for his or her analysis. Financial analyses based on accounting information consistently involve comparisons. Amounts or ratios may be compared with industry norms, the same measurement in a prior period, the same measurement in a competitor’s organization, or with planned and budgeted amounts previously established. Figuring out which comparisons will best answer the questions motivating the analysis is one of the necessary steps in making the best use of accounting information. Financial ratios can help describe the financial condition of an organization, the efficiency of its activities, its comparable profitability...
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...FEMSA 2007: THE FINANCIAL STATEMENT ANALYSIS IMPACT OF DIFFERENCES IN MEXICAN AND US GAAP 1. Compute the following ratios for 2007 using the financial statements prepared using Mexican FRS and expressed in pesos. [Assume the weighted average number of shares outstanding is 17,891,000] a. Current Ratio: Current assets/Current liabilities b. Inventory Turnover: Cost of Goods Sold/Average Inventory c. Profit Margin on Sales: Net Income/Net Sales d. Debt to Assets Ratio: Total Liabilities/Total Assets e. Book Value per Share: Common Stockholders’ Equity/Outstanding Shares 2. Compute the same ratios listed in 1 using the amounts expressed in US$. What are the implications for international financial statement analysis? The importance for credit analysts to consider in reviewing Mexican financial statements is because the net effect of inflation accounting will be to produce financial statements that will not have the conservative bias of statements produced under U.S. GAAP. For example, some of the differences will show on the balance sheet where in Mexican statements all non-monetary assets are restated at current value and the disclosure requirements on Mexican statements are not as comprehensive as in the U.S. When considering the notes to the financial statements in Mexico these notes may contain information about contingent liabilities, debt maturities, and loan covenants - information of vital importance to determining the long-term...
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...CGA-CANADA FINANCIAL ACCOUNTING 4 EXAMINATION December 2005 Marks Time: 4 Hours Notes: 1. 2. 3. 4. 5. 6. 7. All calculations must be shown in an orderly manner to obtain part marks. Round all calculations to the nearest dollar. Narratives for journal entries are not required unless specifically requested. Assume a December 31 fiscal year-end unless specifically stated otherwise. Assume all amounts are material unless directed otherwise. Assume all companies are public companies unless otherwise noted. Assume no companies use differential reporting unless otherwise noted. 30 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each Note: Use the following information to answer parts (a) and (b). On December 31, 2004, CHL Inc. purchased 70% of the common shares of WAC for $700,000. On the date of acquisition, WAC’s shareholders’ equity was as follows: Preferred shares, 6%, cumulative with 3 years in arrears, callable at 102 Common shares, no par value, 20,000 shares outstanding Retained earnings Total $ 200,000 100,000 300,000 $ 600,000 Any purchase price discrepancy is allocated...
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...The Consolidated Financial Statements are prepared in accordance with Inter national Financial Reporting Standards (IFRS) as adopted by the European Union (EU), the supplementary requirements of German law pursuant to Section 315a (1) of the German Commercial Code (Handels esetzbuch) and full IFRS as g issued by the Inter ational Accounting n Standards Board (IASB). They give a true and fair view of the net assets, financial position and results of operations of the group in accordance with these requirements. WWW.SIEMENS.COM/AR/CONSOLIDATED-F INANCIAL-STATEMENTS 246 248 D.1 249 D.2 250 D.3 251 D.4 252 D.5 254 D.6 Consolidated Statements of Income Consolidated Statements of omprehensive Income C Consolidated Statements of Financial Position Consolidated Statements of Cash Flows Consolidated Statements of hanges in Equity C Notes to Consolidated Financial Statements 254 NOTE 1 – Basis of presentation 254 NOTE 2 – S ummary of significant accounting policies 262 NOTE 3 – Critical accounting estimates 264 NOTE 4 – A cquisitions, dispositions and discontinued operations 273 NOTE 13 – Inventories 273 NOTE 14 – Other current assets 274 NOTE 15 – Goodwill 275 NOTE 16 – Other intangible assets 276 NOTE 17 – Property, plant and equipment 278 NOTE 18 – Other financial assets 278 NOTE 19 – Other current financial...
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...HKAS 21 Revised July 2012May 2014 Hong Kong Accounting Standard 21 The Effects of Changes in Foreign Exchange Rates HKAS 21 COPYRIGHT © Copyright 2014 Hong Kong Institute of Certified Public Accountants This Hong Kong Financial Reporting Standard contains IFRS Foundation copyright material. Reproduction within Hong Kong in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and inquiries concerning reproduction and rights for commercial purposes within Hong Kong should be addressed to the Director, Finance and Operation, Hong Kong Institute of Certified Public Accountants, 37/F., Wu Chung House, 213 Queen's Road East, Wanchai, Hong Kong. All rights in this material outside of Hong Kong are reserved by IFRS Foundation. Reproduction of Hong Kong Financial Reporting Standards outside of Hong Kong in unaltered form (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for authorisation to reproduce for commercial purposes outside Hong Kong should be addressed to the IFRS Foundation at www.ifrs.org. Further details of the copyright notice form IFRS Foundation is available at http://app1.hkicpa.org.hk/ebook/copyright-notice.pdf © Copyright 2 HKAS 21 (July 2012May 2014) CONTENTS from paragraph INTRODUCTION IN1 HONG KONG ACCOUNTING STANDARD 21 THE EFFECTS OF CHANGES IN FOREIGN...
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