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LESS:

Share capital

$222,000

Asset revaluation reserve

$166,500

Retained earnings

$83,250

Inventories - Fair Value

$18,400

Less: Inventories - Carrying amount

$16,700

$1,700

Less: Tax Adjustment @ 30%

$510

$1,190

Land - Fair Value

$46,000

Less: Land - Carrying amount

$42,000

$4,000

Less: Tax Adjustment @ 30%

$1,200

$2,800

Machinery - Fair Value

$62,000

Less: Machinery - Carrying amount

$52,000

$10,000

Less: Tax Adjustment @ 30%

$3,000

$7,000

Contingent Liability - Fair Value

-$7,000

Less: Tax Adjustment @ 30%

-$2,100

-$4,900

Patent - Fair Value

$17,000

Less: Tax Adjustment @ 30%

$5,100

$11,900

Research & Development - Fair Value

$13,000

Less: Tax Adjustment @ 30%

$3,900

$9,100

Net fair value of identifiable assets & liabilities

$498,840

Goodwill acquired by Tom Ltd.

$56,160

Amount

Amount

01 July 2020

Dr.

Inventories

$1,700

Cr.

Business Combination Valuation Reserve

$1,190

Cr.

Deferred Tax Liabilities

$510

Dr.

Land

$4,000

Cr.

Business Combination Valuation Reserve

$2,800

Cr.

Deferred Tax Liabilities

$1,200

Dr.

Accumulated Depreciation - Machinery

$13,000

Cr.

Machinery

$3,000

Cr.

Business Combination Valuation Reserve

$7,000

Cr.

Deferred Tax Liabilities

$3,000

Dr.

Business Combination Valuation Reserve

$4,900

Dr.

Deferred Tax Assets

$2,100

Cr.

Contingent Liabilities

$7,000

Dr.

Patent

$17,000

Cr.

Business Combination Valuation Reserve

$11,900

Cr.

Deferred Tax Liabilities

$5,100

Dr.

Research & Development

$13,000

Cr.

Business Combination Valuation Reserve

$9,100

Cr.

Deferred Tax Liabilities

$3,900

Dr.

Goodwill

$56,160

Cr.

Business Combination Valuation Reserve

$56,160

Dr.

Share capital

$222,000

Dr.

Asset revaluation reserve

$166,500

Dr.

Retained earnings

$83,250

Dr.

Business Combination Valuation Reserve

$83,250

Cr.

Shares in Rod Ltd.

$555,000

Amount

Amount

Dr.

Inventories

$1,360

Cr.

Business Combination Valuation Reserve

$952

Cr.

Deferred Tax Liabilities

$408

Dr.

Cost of Sales

$340

Cr.

Income Tax Expense

$68

Cr.

Transfer from BCVR

$272

Dr.

Depreciation Expense

$2,000

Cr.

Accumulated Depreciation - Machinery

$2,000

Dr.

Deferred Tax Liabilities

$600

Cr.

Income Tax Expense

$600

Dr.

Transfer from BCVR

$272

Cr.

Business Combination Valuation Reserve

$272

Date

Amount

Amount

30 June 2021

Dr.

Gain on Sale of Assets

$2,380

Cr.

Vehicle

$2,380

Dr.

Deferred Tax Assets

$714

Cr.

Income Tax Expense

$714

Dr.

Accumulated Depreciation - Vehicle

$238

Cr.

Depreciation Expense

$238

Dr.

Income Tax Expense

$71

Cr.

Deferred Tax Assets

$71

Dr.

Sales Revenue

$46,000

Cr.

Cost of Sales

$41,400

Cr.

Inventory

$4,600

Dr.

Deferred Tax Assets

$1,380

Cr.

Income Tax Expense

$1,380

Dr.

Accounts Payable

$46,000

Cr.

Accounts Receivable

$46,000

Dr.

Sales Revenue

$54,000

Cr.

Cost of Sales

$37,800

Cr.

Inventory

$16,200

Dr.

Deferred Tax Assets

$4,860

Cr.

Income Tax Expense

$4,860

Dr.

Sales Revenue

$48,000

Cr.

Cost of Sales

$45,120

Cr.

Inventory

$2,880

Dr.

Deferred Tax Assets

$864

Cr.

Income Tax Expense

$864

Dr.

Dividend Revenue

$12,000

Cr.

Dividend Paid

$12,000

As per AASB 10, if any company owns 50% or more than 50% shares of any other company, then it has to prepare consolidated financial statements by including the revenues, expenses, assets, liabilities and equity items of the subsidiary company proportionately. In this case, as Tom Ltd owns 93% of the outstanding shares of Rod Ltd., then as per AASB standards, it has to consolidate the financial items of both the companies. The rest of shareholders in Rod Ltd would be treated as minority interest and to adjust their dues, the following adjustments should be made in the above-mentioned requirements:

Amount

Amount

Amount

$555,000

LESS:

Share capital

$222,000

Asset revaluation reserve

$166,500

Retained earnings

$83,250

Inventories - Fair Value

$18,400

Less: Inventories - Carrying amount

$16,700

$1,700

Less: Tax Adjustment @ 30%

$510

$1,190

Land - Fair Value

$46,000

Less: Land - Carrying amount

$42,000

$4,000

Less: Tax Adjustment @ 30%

$1,200

$2,800

Machinery - Fair Value

$62,000

Less: Machinery - Carrying amount

$52,000

$10,000

Less: Tax Adjustment @ 30%

$3,000

$7,000

Contingent Liability - Fair Value

-$7,000

Less: Tax Adjustment @ 30%

-$2,100

-$4,900

Patent - Fair Value

$17,000

Less: Tax Adjustment @ 30%

$5,100

$11,900

Research & Development - Fair Value

$13,000

Less: Tax Adjustment @ 30%

$3,900

$9,100

Net fair value of identifiable assets & liabilities

$498,840

ADD:

Non-Controlling Interest @7% of NFVINA

$34,919

Goodwill acquired by Tom Ltd.

$91,079

Date

Amount

Amount

01 July 2020

Dr.

Goodwill

$91,079

Cr.

Business Combination Valuation Reserve

$91,079

Dr.

Share capital

$206,460

Dr.

Asset revaluation reserve

$154,845

Dr.

Retained earnings

$77,423

Dr.

Business Combination Valuation Reserve

$116,273

Cr.

Shares in Rod Ltd.

$555,000

Dr.

Share capital

$15,540

Dr.

Asset revaluation reserve

$11,655

Dr.

Retained earnings

$5,828

Dr.

Business Combination Valuation Reserve

$1,896

Cr.

NCI  

$34,919

30 June 2021

Dr.

Transfer from BCVR

$253

Cr.

Business Combination Valuation Reserve

$253

Dr.

Non-Controlling Interest

$117

Cr.

NCI Share of Profit

$117

Dr.

Transfer from BCVR

$19

Cr.

Business Combination Valuation Reserve

$19

30 June 2021

Dr.

Non-Controlling Interest

$117

Cr.

NCI Share of Profit

$117

(for Gain on sale of assets)

Dr.

NCI Share of Profit

$12

Cr.

Non-Controlling Interest

$12

(for Depreciation expenses adjusted)

Dr.

Non-Controlling Interest

$794

Cr.

NCI Share of Profit

$794

Dr.

Dividend Revenue

$11,160

Cr.

Dividend Paid

$11,160

Dr.

Non-Controlling Interest

$840

Cr.

Dividend Paid

$840

Consolidated financial statement of parent company and subsidiary company helps in preparing consolidated worksheet. Consolidation adjustment are made for goodwill, balances and internal transactions. Consolidated worksheet shows consolidation of financial details of all subsidiary including parent company and one balance sheet is prepared for whole group (Carini et al. 2018). In other words, consolidation adjustment helps in adding assets, liabilities, results of parent company and subsidiary company. Adjustment in consolidated worksheet is very necessary as book value of parent as well as subsidiary company is shown individually. Adjustment in consolidation worksheet is also important for the purpose of consolidation. Therefore, consolidated worksheet adjustment is necessary as all important adjustments and values of final consolidation and elimination are disclosed properly. It also helps in saving money as well as operating more efficiently.

Preparation of consolidated worksheet adjustment is done when more than 50 per cent of shares of subsidiary company is hold by parent company. Parent company is qualified for using consolidated worksheet when 20% is held by them. In other words, preparation of consolidated financial statement is done when ownership interest of one company in business is provided with majority of voting power. Therefore, it can be said that consolidated worksheet adjustment is necessary one company owns 50% of outstanding stock of other company.

In consolidated worksheet all adjustment related to consolidation are disclosed. Consolidation worksheet is mainly prepared when consolidation account is calculated. In other words, when calculation of consolidation account over number of years is prepared then each time preparation of consolidated worksheet is done. While posting consolidated worksheet adjustment, investment in subsidiary is not taken into consideration that is they are eliminated. Adjustment related to consolidation are not disclosed in own books of parent or subsidiary company. Therefore, it can be said that consolidated worksheet adjustment is recorded in consolidated worksheet (Robinson 2020).

For full control and for non-controlling interest the accounting standard that is relevant to consolidation process is IFRS 10. Principles of presentation and preparation of consolidated financial statement is disclosed in IFRS when one or more than one entity is controlled by single entity. According to IFRS 10, consolidated financial statement is a statement which shows assets, liability, equity, income, expense and cash flows of both parent company and subsidiary company (Issakova et al. 2017). All the information is disclosed a one economic entity.

Reference

Carini, c., rocca, l., veneziani, m. and teodori, c., 2018. the reporting entity concept in the public consolidated financial statement. international journal of business and social science, 9(1), pp.1-21.

Issakova, s.a., moldabekova, a.s., kenzhebayeva, m.t., ?libekova, v.n. and tuleyeva, g.t., 2017. preparing consolidated financial statements in accordance with ifrs.

Robinson, t.r., 2020. international financial statement analysis. john wiley & sons

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[Accessed 18 July 2024].

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