Comprehensive Financial Management Report: PARISS Plc and Subsidiaries

This report presents a comprehensive analysis of the financial statements of PARISS Plc, including the Statement of Profit or Loss and the Statement of Financial Position. The report covers the consolidation of subsidiaries, SwP and Angel, with detailed workings for goodwill computation and consolidation entries. It highlights adjustments made to correct errors in lease expenses and the application of accounting standards like AASB 127 and AASB 117. The report also evaluates the importance of human capital in financial reporting, noting that neither SwP nor Angel Plc has disclosed the value of human capital, and discusses the impact of employee performance on share value. The analysis emphasizes the importance of accurate financial statements for PARISS Plc's sustainability and competitive advantage, as well as the need to consider human capital in financial reporting for a complete picture of a company's value.

Running head: ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and Financial Management
Name of the Student:
Name of the University:
Author’s Note:

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ACCOUNTING AND FINANCIAL MANAGEMENT
Table of Contents
Task 1:.............................................................................................................................................2
Task 2:.............................................................................................................................................4
Task 3:.............................................................................................................................................6
Requirement a:.............................................................................................................................6
Requirement b:...........................................................................................................................13
Reference List and Bibliography...................................................................................................16

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ACCOUNTING AND FINANCIAL MANAGEMENT
Task 1:
In the books of PARISS Plc.
Statement of Profit or Loss
For the period ended 31 December 2016
Particulars Amount
£’000
Revenue 8500
Cost of Sales -3374.25
Gross profit 5125.75
Distribution and administrative expenses -3000
Investment income (dividend from SwP) 175
Investment income (profit from Angel) 85.5
Finance cost -263
Profit before tax 2123.25
Income tax expense -890
PROFIT FOR THE YEAR 1233.25

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ACCOUNTING AND FINANCIAL MANAGEMENT
In the books of PARISS Plc.
Statement of Financial Position
As at 31 December 2016
Particulars Amount Amount
£’000 £’000
Non-current assets:
Property, plant and equipment 8500
Intangible assets 5700
Investment in SwP 3500
Investment in Angel 3085.5
Leasehold Assets 94.25
20879.75
Current assets:
Inventories 4000
Trade receivables 2000
6000
Total assets 26879.75
Equity and reserves:
Share capital (£1 nominal value equity shares) 4000
Retained earnings 7591.25 11591.25
Non-current liabilities
Long term loan notes 9700
Lease Liability 88.5
9788.5

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ACCOUNTING AND FINANCIAL MANAGEMENT
Current liabilities:
Trade payables 4500
Bank overdraft 1000
5500
Total Equity and liabilities 26879.75
Task 2:
In the books of PARISS Group Plc.
Consolidated Statement of Profit or Loss
For the period ended 31 December 2016
Particulars Amount
£’000
Revenue 12700
Cost of Sales -5302.3
Gross profit 7397.75
Distribution and administrative expenses -3820
Investment income (dividend from SwP) 0
Investment income (profit from Angel) 85.5
Finance cost -315
Profit before tax 3348.25
Income tax expense -1150
PROFIT FOR THE YEAR 2198.25
Profit attributable to:

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ACCOUNTING AND FINANCIAL MANAGEMENT
Shareholders of PARISS Plc. 1402.65
Non-controlling interest (W3) 795.6
2198.25
In the books of PARISS Group Plc.
Consolidated Statement of Financial Position
As at 31 December 2016
Particulars Amount
£’000
Amount
£’000
Non-current assets:
Property, plant and equipment 14260
Intangible assets 7850
Goodwill 1463
Investment in SwP 0
Investment in Angel 3085.5
Leasehold Assets 94.25 26752.8
Current assets:
Inventories 5492
Trade receivables 2900
8392
Total assets 35144.8
Equity and reserves:
Share capital (£1 nominal value equity shares) 4000
Retained earnings 8560.65
Equity attributable to shareholders 12560.7

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ACCOUNTING AND FINANCIAL MANAGEMENT
Non-Controlling interest 789.6
Total equity
Non-current liabilities
Loan notes 11600
Contingent Liability 1203
Deferred Liability 1003
Lease Liability 88.5 13894.5
Current liabilities:
Trade payables 6500
Bank overdraft 1400 7900
Total Equity and liabilities 35144.8
Task 3:
Requirement a:
Workings:
Goodwill Computation:
Particulars
Carryin
g
Amount
Fair
Valu
e
Amoun
t
Share Capital 1300 1300
Retained Earnings 3600 3600
Contingent Consideration -800 -800
Deferred Consideration -1000 -1000
Land 40 100 60
Research & Development 150 150

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ACCOUNTING AND FINANCIAL MANAGEMENT
Contingent Liability -400 -400
Net Fair Value of
Identifiable Assets &
Liabilities 2910
Less: Non-Controlling
Interest 873
Net Value of the
Investment 2037
Purchase Consideration 3500
Goodwill 1463
Consolidation & Adjustment Entries:
Date Particulars
Amoun
t Amount
3/31/2016 Share Capital A/c. Dr. 910
Retained Earnings A/c. Dr. 2520
Goodwill A/c. 1463
To,
Business Combination
Valuation Reserve A/c. 1393
To,
Investment in SwP Ltd.
A/c. 3500
Property, Plant & Equipment
A/c. Dr. 60
Intangible Assets A/c. Dr. 150
Business Combination
Valuation Reserve A/c. Dr. 1990
To, Contingent Liability A/c. 1200
To, Deferred Liability A/c. 1000
Share Capital A/c. Dr. 390
Retained Earnings A/c. Dr. 1080
To,
Business Combination
Valuation Reserve A/c. 597

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ACCOUNTING AND FINANCIAL MANAGEMENT
To, NCI A/c. 873
12/31/201
6 Investment Income A/c. Dr. 175
NCI A/c. Dr. 75
To, Dividend Paid A/c. 250
Revenue A/c. Dr. 200
To, Cost of Sales A/c. 192
To, Inventory A/c. 8
NCI A/c. Dr. 2.4
To, NCI share of Profit A/c. 2.4
Lease Expenses A/c. Dr. 20
Lease Liability A/c. Dr. 5.75
To, Cost of Sales A/c 25.75
Leasehold Assets A/c. Dr. 94.25
To, Lease Liability A/c. 94.25
Investment in Angel Ltd. 85.5
Investment Revenue A/c. 85.5
Consolidation Worksheet:

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ACCOUNTING AND FINANCIAL MANAGEMENT
Particulars PARISS SwP Debit Credit Group Debit Credit Parent
Revenue 8500 4400 5 200 12700 12700
Cost of Sales -3374.25 -2120 -192 5 -5302.25 -5302.25
Gross Profit 5125.75 2280 7397.75 7397.75
Distribution & Administrative
Expenses -3000 -820 -3820 -3820
Dividend from Swp 175 0 4 175 0 0
Investment Income from
Angel 85.5 85.5 85.5
Finance Cost -263 -52 -315 -315
Profit before Tax 2123.25 1408 3348.25 3348.25
Income Tax -890 -260 -1150 -1150
Profit for the year 1233.25 1148 2198.25 2.4 6 2200.65
Retained Earnings
(31/12/2015) 6358 3602 1,3 3600 6360 6360
7591.25 4750 8558.25 8560.65
Dividend Paid -250 -250 4 0 0
Retained Earnings
(31/12/2016) 7591.25 4500 8558.25 8560.65
Share Capital 4000 1300 1,3 1300 4000 4000
BCVR 2 1990 1990 1,3 0 0
NCI 0 4,6 77.4 873 3 795.6
Total Equity & Reserves 11591.25 5800 12558.25 12560.65
Bond 9700 1900 11600 11600
Contingent Liability 1200 3 1200 1203
Deferred Liability 1000 3 1000 1003
Lease Liability 88.5 88.5 88.5
Trade Payables 4500 2000 6500 6500
Bank Overdraft 1000 400 1400 1400
Total Equity & Liability 26879.75 10100 34346.75 34355.15
Property,Plant & Equipment 8500 5700 2 60 14260 14260
Intangible Assets 5700 2000 2 150 7850 7850
Goodwill 1 1463 1463 1463
Investment in SwP 3500 3500 2 0 0
Investment in Angel 3085.5 3085.5 3085.5
Leasehold Assets 94.25 94.25 94.25
Inventories 4000 1500 8 5 5492 5492
Trade Receivables 2000 900 2900 2900
Total Assets 26879.75 10100 35144.75 35144.75
Adjustments NCI
Briefing Notes:
There are various adjustments that have been made, therefore these errors and
adjustments have been highlighted. The Australian Accounting Standards Board in the AASB
127 has defined the accounting treatment for the consolidated entities. The particular standard
has been applied in the preparation and presentation of the consolidated financial statements in
case for a group of entities under the control of the parent. In order to understand the accounting
treatments that have been applied for the consolidated entities, the term consolidated financial

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ACCOUNTING AND FINANCIAL MANAGEMENT
statements must be understood properly. Consolidated financial statements refer to the financial
statements that have been prepared for a group presented as those of a single economic entity.
In AASB 117, it has been mentioned that the exact consolidation procedure that should
be followed while preparing the financial statements. An entity should combine the consolidated
financial statements of the subsidiaries and the parent company by adding together the items of
assets, liabilities, income, equity and expenses. The essentials that have been stated in the AASB
117 about the financial statements is that the carrying amounts of the investments that has been
incurred by the parent company in the subsidiary entities along with the part of the equity
allotted to each subsidiary should be eliminated.
The identification of the minority interests in the profit or loss of the consolidated entities
should also be efficiently executed.
The minority interests in regards to the net assets of the subsidiary companies have to be
identified and separated.
The intragroup balances, transactions, income, and expenses have to be eliminated in full.
The financial statements of the subsidiary companies and the financial statements of the
parent company that should be utilized in the preparation of the consolidated financial statements
should be of the same reporting date. In case the financial statements of the subsidiary and the
financial statements of the parent company are of different dates then the additional financial
statements have to be prepared along with the consolidated financial statements.
The accounting policies utilized for the preparation of the consolidated financial
statements should be uniform in all cases and for all transactions.

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ACCOUNTING AND FINANCIAL MANAGEMENT
The expenses and income of a subsidiary that are included in the consolidated financial
statements should be entered in the books of accounts from the acquisition date. This has been
mentioned in AASB 3.
It should be further noted here that the investment in an entity has to be accounted in
terms of ASSB 139 that is Financial Instruments: Recognition and Measurement.
The minority interests have to be represented in the consolidated financial statements
under equity that has been separated from the shareholder’s equity fund of the parent company.
The profit or loss that has been derived in total has to be attributed to the shareholders
and minority interests of the parent company.
The losses in case of a minority in a consolidated subsidiary might be greater than the
minority interest in the equity of the subsidiary. The amount by which the loss is greater than the
minority interest in the equity along with other losses that is applicable to the minority has to be
allocated against the majority interest. If the case is such that the subsidiary earns profit then
such profit has to be allocated to the majority interest until the previously share of losses of the
minority that has been absorbed by the majority is subsequently recovered.
In case the subsidiary owns a huge amount of outstanding cumulative preference shares
that have been held by the minority interests and has been essential classified as equity, the
parent company computes the share of gain or loss after proper adjustment of the dividends. This
is done in regards to the shares irrespective of the fact that the dividends have been declared or
not.
The above mentioned points are essentially the steps that have been considered in
preparing the consolidated financial statements. However, there have been various adjustments