Advance Financial Accounting: Reporting and Disclosure

This report discusses the issues regarding control concept, significant influence, and goodwill arising on the date of acquisition. It provides guidance on the key aspects of these concepts for group reporting and obligations to provide the same. The report also covers reporting under business combination and consolidated financial statements, and disclosure requirements under IAS 27 and IAS 28.

Running head: ADVANCE FINANCIAL ACCOUNTING
Advance financial accounting
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Table of Contents
Objective....................................................................................................................................2
Scope..........................................................................................................................................2
Key definition.............................................................................................................................2
Reporting under business combination and consolidated financial statements.........................3
Disclosure...................................................................................................................................3
Reference....................................................................................................................................5

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Issues 4
Objective
The objective of the report is focussing on the issues those were not treated
appropriately by Engineering & Construction PLC while preparing the CFS (consolidated
financial statements). Hence, the report will highlight the issues regarding the control
concept, significant influence and amount of goodwill arising on the date of acquisition. It
will further guidance on account of the key aspects of the above mentioned concepts for
including the purpose and importance under group reporting and obligations to provide the
same. Finally the report will provide conclusion based on the discussion (Müller 2014).
Scope
The standard shall be applied in respect of accounting for the investments in
associates in presentation and preparation of the CFS by the investor. However, it does not
treat with the investment accounting in the associates in preparing and presenting of the
separate financial statements by the investors.
Key definition
Change in the definition of control under IFRS 10 – Consolidated financial statement
is estimated to have great impact on investment management industry. The investment
manager will require applying more comprehensive guidance of IFRS 10. It is regarding
stating whether they have control on the entities with whom they are associated and whether
they will require consolidating the entities under their financial statements. The term control
is stated as ownership, indirectly or directly through the subsidiaries of more than 50% of
voting power of any entity or has control on the composition of the board of directors in case
the company or composition of governing body in circumstances where the other enterprises

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for obtaining the economic benefits from the activities (Iasplus.com 2018). The term
significant influence is stated as the power of participating in financial or / and the operating
policy related decisions of of investee however does not have any control on those policies.
Significant influence is achieved through share ownership, agreement or statute. However, if
the investor indirectly or directly holds 20% or more than 2015 of the voting power of
investee it is considered as the investors has significant influence (Mca.gov.in 2018).
Reporting under business combination and consolidated financial statements
While the entity prepares the separate financial statement, it must account for the
investments under subsidiaries, associates and joint ventures either – (i) at the cost (ii) as per
IFRS 9 – financial instruments or (iii) through usage of the equity method as per IAS 28 –
Investments in joint ventures and associates. Further, the investors must use same accounting
for each investment category (Iasplus.com 2018). Investment treated at cost or usage of
equity method must be accounted as per IFRS 5 – Non-current assets held for sale and
discontinued operations.
Excess of cost, if any to parent of the investment in the subsidiary over parent’s
proportion of the equity of subsidiary, on the date when the investments in subsidiary is made
shall be stated as goodwill. This goodwill shall be recorded as asset under the CFS
(Mca.gov.in 2018)
Disclosure
IAS 27 presents the disclosure as well as accounting requirements for the purpose of
investment in the subsidiaries, associates and joint ventures (Iasplus.com 2018). Proper
description and listing including ownership interest proportion shall be disclosed. If the
voting power proportion varies with the ownership interest it shall further be disclosed in

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CFS. Investments in associates that are accounted to use equity method shall be categorized
as the long term investment and shall be disclosed under the consolidated financial statements
separately. Names of associates for which the date of reporting varies from investor’s
financial statement date difference in the reporting dates shall be disclosed in CFS. In case
the associate uses the accounting policies that varies with which adopted for same events and
transactions under similar conditions, the fact behind using different accounting policies shall
be disclosed.

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Reference
Iasplus.com. 2018. IAS 27 — Separate Financial Statements (2011). [online] Available at:
https://www.iasplus.com/en/standards/ias/ias27-2011 [Accessed 20 Nov. 2018].
Iasplus.com. 2018. IAS 28 — Investments in Associates and Joint Ventures (2011). [online]
Available at: https://www.iasplus.com/en/standards/ias/ias28-2011 [Accessed 20 Nov. 2018].
Mca.gov.in. 2018. [online] Available at:
http://www.mca.gov.in/Ministry/notification/pdf/AS_23.pdf [Accessed 20 Nov. 2018].
Müller, V.O., 2014. The impact of IFRS adoption on the quality of consolidated financial
reporting. Procedia-Social and Behavioral Sciences, 109, pp.976-982.