Advanced Financial Accounting

This document provides advice to the directors of Moonraker Ltd for the requirements of AASB-10, explains why it is necessary for making adjustments for intra-group transactions, and analyzes the consolidation accounting concept and other relevant issues that might be faced by the directors.

Running head: ADVANCED FINANCIAL ACCOUNTING
Advanced Financial Accounting
Student Name:
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Authors Note:

ADVANCED FINANCIAL ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................2
Part A:........................................................................................................................................2
Providing advice to the directors of Moonraker Ltd for the requirements of AASB-10:..........2
Stating why it is necessary for making adjustments for intra group transactions:.....................3
Analyzing the consolidation accounting concept and other relevant issues that might be faced
by the directors:..........................................................................................................................4
Part B:.........................................................................................................................................5
Conclusion:................................................................................................................................9
References:...............................................................................................................................11

ADVANCED FINANCIAL ACCOUNTING
Introduction:
The overall assessment mainly helps in evaluating the requirements of AASB 10 that
addresses the concern of control conditions that needs to be adopted by the organization
having different subsidiaries. The system directly evaluates two organizations from different
countries to detect the actual consolidated financial statement, which could be used for
identifying the financial performance of the parent company after accommodating the values
of subsidiary. The analysis also evaluates all the relevant calculations conducted with the help
of exchange values to determine the actual value of Freesin Inc in Australian dollars after
converting it from Hong Kong dollars. The analysis continues to understand and provide the
necessary adjustments that are required for the intra-group transactions and help in providing
a clear understanding of the consolidating accounting concepts and relevant accounting issues
that need to be addressed by the directors of the organization.
Part A:
Providing advice to the directors of Moonraker Ltd for the requirements of AASB-10:
The analysis of the accounting standard as b has a relatively help in detecting that the
organization needs to meet certain objectives to prepare the overall consolidated financial
statement for the entity or more entities. The relevant objectives that need to be met by the
organization are depicted as follows.
 One of the foremost objectives depicted in paragraph 2 of AASB 10 is the
requirement of an entity that is parent to control one or more subsidiaries before
allowing the consolidated financial statement in their annual report. This indicates that
one company needs to control one or more than one companies to inductee the AASB
10 standard in their financial statement (Aasb.gov.au, 2019).

ADVANCED FINANCIAL ACCOUNTING
 The second objective that needs to be met by the parent company before
accommodating the AASB 10 standards is to establish the control on the subsidiary
organization. This indicates that if the subsidiary organization is not under control by
the parent company then the consolidated financial statement cannot be allowed.
Hence, the principle of control needs to be present between the parent company and
the subsidiary company (Aasb.gov.au, 2019).
 The third objective that needs to be applied by the parent company is relevantly setup
the application of principal of control and identifies the investors control over the
investee (Aasb.gov.au, 2019).
 Furthermore, the adequate accounting requirements for the preparation of the
consolidated financial statement needs to be set out by the parent company for the
subsidiary organization as it helps in establishing the principle of control. Therefore, it
is required for the subsidiary company to follow the accounting requirements that
have been set out by their parent company while preparing their financial reports
(Aasb.gov.au, 2019).
Stating why it is necessary for making adjustments for intra group transactions:
The intragroup transaction adjustment is relatively necessary for the parent and
subsidiary organization for presenting the actual financial position in their financial report.
The consolidated financial statements of the group has a relatively help in detecting the actual
economic entity which benefits from the overall operations of the combined parent and
subsidiary organization (Gray, 2014). Moreover, the consolidated financial statements can
only contain profits assets and liabilities to the party's external of the group. Furthermore, the
adjustments that are made with the help of intra-group transactions relatively help in
assessing the internal conditions of the economic entity and do not reflect the effects of the

ADVANCED FINANCIAL ACCOUNTING
transactions on the overall external parties. Therefore, the adjustments help in supporting
consistent with the entity concept of consolidation and define the net assets of the parent and
the net assets of the subsidiary in the process. This helps in assessing the transactions that
were between two parties before making the adequate adjustments in full to detect the actual
value of the economic entity (Hoyle, Schaefer & Doupnik, 2015).
Moreover, it is necessary to make adjustments for the intra group transaction as it
helps insole define the monetary articulations that it comprises with both parent and
subsidiary organization. In addition, it also helps in combining the positively explanation for
the overall cost benefits resources and liabilities that has been used by the group.
Furthermore, it also helps in adjusting the exchange transactions that helps in detecting the
financial substance and allows the group to obtain the exchange loss or profit from the
transaction (Gillis, Petty & Suddaby, 2014). Therefore, it could be understood that with the
help of intragroup entries elimination based on concept such as individual cannot on profit by
entering into the transaction with him is adequately analyzed.
Analyzing the consolidation accounting concept and other relevant issues that might be
faced by the directors:
This is the major difference between significant influence and control, which are
depicted as follows.
 Significant influence relatively allows the investor to hold at least 20% of the voting
power, which directly helps them to analyze and evaluate the operating and financial
policy decisions of entity. However, in case of control the control party for the entity
collectively introduces the operating in financial policies. Therefore, under significant
influence the investor is not viable to prepare the consolidated financial statement as a

ADVANCED FINANCIAL ACCOUNTING
minimum amount of investment is conducted in the organization (Grossi, Mori &
Bardelli, 2014).
 Therefore, the significant influence that is portrayed by the investor does not
comprehend with the control measure that is conducted by an organization with
subsidiary. Due to the control conditions, the parent company is able to prepare
consolidated financial statements and depict the financial position after
accommodating the transactions conducted by the subsidiary organization. This
mainly states that significant influence can be reversed through a clear demonstration
with other investors, whereas it cannot be conducted under the control conditions
(Gillis et al., 2014).
 Therefore, consolidation accounting concepts is required for addressing other relevant
issues that is faced by the directors of the organization, while preparing their financial
statements.
Part B:
Particulars
Cumbermes
Ltd
Freeson
Inc Debit Credit Amount
Sales 2,76,80,000
2,72,54,55
0
15,33,00
0
5,34,01,55
0
Purchases 2,01,65,000
1,87,24,50
0
3,88,89,50
0
Gross profit 75,15,000 85,30,050
1,45,12,05
0
Administrative
Expenses 1,97,100 1,97,100
Employee Benefits 73,000 73,000
Advertising 18,500 62,415 80,915
Freight Out 44,550 72,270 1,16,820
Phone Costs

ADVANCED FINANCIAL ACCOUNTING
58,700 65,372 1,24,072
Doubtful Debts Expense 24,790 1,02,930 1,27,720
Rent Office Space 1,27,000 99,645 2,26,645
Rent Warehouse 3,88,000 2,62,800 6,50,800
Insurance 1,48,770 57,926 2,06,696
Salaries 4,40,750 4,06,574 8,47,324
Technical Expenses 31,755 31,755
Depreciation Expense 5,90,000 5,90,000
Other expenses 4,30,640 2,75,174 7,05,814
Wages 9,70,000 6,88,865 16,58,865
Sundry Income 25,000 14,235 39,235
Dividend income 1,01,400
1,01,400.0
0 -
Gain from currency
exchange 1,07,350 1,07,350
EBIT 43,26,700 63,28,812 90,21,112
Interest Expense 1,10,000 5,25,600 5,28,885 1,06,715
Interest Income 2,75,000 54,750 3,29,750
EBT 44,91,700 58,57,962 92,44,147
Income Tax Expense 13,56,000 11,55,992 25,11,992
Net profit 31,35,700 47,01,970 67,32,155
Retained Earnings 1/7 14,55,000 16,20,000 30,75,000
Interim Dividend 5,00,000 43,400 43,400 5,00,000
Final Dividend 9,50,000 58,000 58,000 9,50,000
Retained Earnings 30/6 31,40,700 62,20,570 83,57,155
General Reserve 5,00,000 5,47,500 10,47,500
Share Capital 20,00,000 43,80,000 43,80,000 20,00,000

ADVANCED FINANCIAL ACCOUNTING
BCVR 5,71,635
-
5,71,635
Total equity 56,40,700
1,11,48,07
0
1,08,33,02
0
Bank Overdraft 19,37,274 19,37,274
Dividend Payable 58,000 58,000
Other Loans 18,00,000 32,56,681 50,56,681
Tax Payable 3,37,500 1,88,888 5,26,388
Trade Creditors 19,86,440 16,01,985 35,88,425
Bank Mortgage 32,50,000 72,27,000
1,04,77,00
0
Provisions 36,54,000 36,54,000
Total Liabilities 1,10,27,940
1,42,69,82
8
2,52,97,76
8
Total Equity and
Liabilities 1,66,68,640
2,54,17,89
8
3,61,30,78
8
Sundry debtors 47,085 47,085
Bank 2,55,680 2,55,680
Trade Debtors 12,57,500 21,35,250 15,33,000 49,25,750
Allowance for Doubtful
Debts
-
1,24,790
-
1,02,930
-
2,27,720
Plant & Equipment
(Net) 8,18,560 73,91,250 82,09,810
Land (Net) 19,54,000 76,65,000 96,19,000
Inventory 20,70,000 17,82,500 38,52,500
Dividends Receivable 58,000 58,000
Shares in Freeson Inc 61,20,000
61,20,00
0 -
Buildings (Net) 8,09,690 51,30,993 59,40,683
Depreciation 13,68,750
13,68,75
0 -

ADVANCED FINANCIAL ACCOUNTING
I/Coy Loan 34,50,000 34,50,000
Total Assets 1,66,68,640
2,54,17,89
8
3,61,30,78
8
Particulars Amount Amount
Sales 5,34,01,550
Purchases 3,88,89,500
Gross profit 1,45,12,050
Administrative Expenses 1,97,100
Employee Benefits 73,000
Advertising 80,915
Freight Out 1,16,820
Phone Costs 1,24,072
Doubtful Debts Expense 1,27,720
Rent Office Space 2,26,645
Rent Warehouse 6,50,800
Insurance 2,06,696
Salaries 8,47,324
Technical Expenses 31,755
Depreciation Expense 5,90,000
Other expenses 7,05,814
Wages 16,58,865
Sundry Income 39,235
Gain from currency
exchange 1,07,350 54,90,939
EBIT 90,21,112
Interest Expense 1,06,715
Interest Income 3,29,750 2,23,035
EBT 92,44,147
Income Tax Expense 25,11,992
Net profit 67,32,155
Retained Earnings 1/7 30,75,000
Interim Dividend 5,00,000
Final Dividend 9,50,000 16,25,000
Retained Earnings 30/6 83,57,155
Particulars Amount Amount
Retained Earnings 30/6 83,57,155
General Reserve 10,47,500
Share Capital 20,00,000
BCVR -5,71,635

ADVANCED FINANCIAL ACCOUNTING
Total equity 1,08,33,020
Bank Overdraft 19,37,274
Dividend Payable 58,000
Other Loans 50,56,681
Tax Payable 5,26,388
Trade Creditors 35,88,425
Bank Mortgage 1,04,77,000
Provisions 36,54,000
Total Liabilities 2,52,97,768
Total Equity and Liabilities 3,61,30,788
Sundry debtors 47,085
Bank 2,55,680
Trade Debtors 49,25,750
Allowance for Doubtful Debts -2,27,720
Plant & Equipment (Net) 82,09,810
Land (Net) 96,19,000
Inventory 38,52,500
Dividends Receivable 58,000
Shares in Freeson Inc -
Buildings (Net) 59,40,683
Depreciation -
I/Coy Loan 34,50,000
Total Assets 3,61,30,788
Conclusion:
The overall assessment directly value research the requirements of the AASB 10 and
helps the directors to detect that measures that needs to be adopted for preparing the
consolidated financial statement. Furthermore, adequate analysis has been conducted on the
necessity of making adjustments for the intragroup transactions. With the help of intra group
transactions the parent company is able to portray actual financial position and benefits that
was obtained during the financial year. The relevant issues relating to the consolidation
accounting concept has been evaluated for the directors to help them understand the concept
and reduce the occurrence of self-transaction. The consolidated financial performance of
Cumbermes Ltd and Freeson Inc is conducted for detecting the measures that needs to be
used by the parent companies for their actual financial position.

ADVANCED FINANCIAL ACCOUNTING

ADVANCED FINANCIAL ACCOUNTING
References:
Aasb.gov.au. (2019). Aasb.gov.au. Retrieved 24 September 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf
Gillis, P., Petty, R., & Suddaby, R. (2014). The transnational regulation of accounting:
insights, gaps and an agenda for future research. Accounting, Auditing &
Accountability Journal, 27(6), 894-902.
Gillis, P., Petty, R., Suddaby, R., & Nobes, C. (2014). The development of national and
transnational regulation on the scope of consolidation. Accounting, auditing &
accountability journal.
Gray, S. J. (Ed.). (2014). International accounting and transnational decisions. Butterworth-
Heinemann.
Grossi, G., Mori, E., & Bardelli, F. (2014). From consolidation to segment reporting in local
government: accountability needs, accounting standards, and the effect on decision-
makers. Journal of Modern Accounting and Auditing, 10(1), 32-46.
Hoyle, J. B., Schaefer, T., & Doupnik, T. (2015). Advanced accounting. McGraw Hill.