Corporate Accounting: Analysis of Consolidated Financial Statements

This report analyzes the consolidation consequences of investments made by Northern Australia Global Investment (NAGIL) in SL, VBCL, MSCL, and CrocsRU. It evaluates whether NAGIL is required to prepare the consolidated financial statement for these companies based on AASB 10. The report also discusses the legislations applicable to the accounting standard and their application in each case.

Running head: CORPORATE ACCOUNTING
CORPORATE ACCOUNTING
Name of the student:
Name of the University:
Authors note:

1CORPORATE ACCOUNTING
Table of Contents
Answer to question 1..................................................................................................................2
Answer to Question 2.................................................................................................................3
Answer to Question 3.................................................................................................................4
Answer to Question 4.................................................................................................................5
Reference....................................................................................................................................9

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Answer to question 1
a)
In the Books Of Small limited
Journal Entries
date Particulars Debit Credit
30-Jun-18 Profit on Fry ltd $24,000.00
To, Profit And Loss $24,000.00
Profit and loss $9,000.00
To, Current Tax $9,000.00
Dividend $24,000.00
Investment in Fry $24,000.00
30-Jun-19 Profit on Fry ltd $21,000.00
To, Profit And Loss $21,000.00
Profit and loss $7,500.00
To, Current Tax $7,500.00
Dividend $4,500.00
Investment in Fry $4,500.00
30-Jun-20 Profit on Fry ltd $18,000.00
To, Profit And Loss $18,000.00
Profit and loss $6,000.00
To, Current Tax $6,000.00
Dividend $3,000.00
Investment in Fry $3,000.00
b)

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Work Sheet
Opening Adjustment Balance
particulars Debit Credit Debit Credit Debit Credit
Investment In Fry $50,000.00
$3,000.0
0 $53,000.00
Share capital $10,000.00 $10,000.00
Retained Earning $49,000.00 $9,000.00 $58,000.00
Profit $0.00 $18,000.00 $0.00 $18,000.00
Tax
$6,000.0
0 $6,000.00
Dividends $3,000.00 $3,000.00
Answer to Question 2
Liquidator Final Statement Of Accounts
Receipt Amount Payment
Weigh
t Amount
Sale Of
Land $7,500,000.00 Liquidation Expense
Other Assets $6,750,000.00 Liquidation Remuneration $600,000.00
Preferential Creditors
Secured Creditors $150,000.00
Tax Payable $1,050,000.00
local Government Rates $300,000.00
staff wages $900,000.00
Executive Director wage $450,000.00
Staff Leave $150,000.00
Executive Director leave $150,000.00
Unsecured Holders
Secured Creditors ( unsecured portion) 0.7375 $7,743,750.00
Bank Overdraft 0.2 $2,100,000.00
Unsecured Trade payable 0.0625 $656,250.00
Total
$14,250,000.0
0
$14,250,000.0
0

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Answer to Question 3
Journal
Particulars Debit Credit
Purchase Consideration $44,720.00
To, Accounts Receivable $44,720.00
Profit On Loss $7,231.00
To, Inventory $7,231.00
Profit and Loss $2,580.00
To, Goodwill $2,580.00
Profit On plant $24,080.00
TO. Profit and Loss $24,080.00
management Fee $22,970.00
Profit and Loss $22,970.00
Income Tax $81,923.60
To, Profit and Loss $81,923.60
Investment in Seven $63,984.00
To, Dividend Receivable $63,984.00
Non-Controlling Interest smoke Seven
percentage Of Holding 80% 20%
Addition or deduction 0 0
Closing 80% 20%
Answer to Question 4
Executive Summary
In this report, it will be evaluated whether NAGIL is required to prepare the
consolidated financial statement for the companies given in the case study.

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Several legislations from AASB 10 will be taken in to this analysis in order to figure
out whether it is needed to prepare the consolidated financial statement (Aburous 2016).
In the last segment, it will be explained with the reference from the appropriate
legislations taken from AASB 10 whether it is required to prepare the consolidated financial
statements for these companies or not (Rutledge et al. 2016).
Introduction
In this report, certain investment that is owned by Northern Australia Global
Investment need to analyze with a purpose of figuring out the consolidation consequences of
those investments. As an investment agency, the company has been engaged with several
firms in investment purposes. In the given consequences, each of these investments cannot be
considered as a profitable investment and it is certain that various consequences will be
emerged from these investments. The consolidation status of each of these investments is
being analyzed with reference to the AASB 10 and the legislations stated in various section
of the act for each kind of investments will be explained.
Overview of the Issue
For the first segment, it is required to figure out the consolidation status of the
investment made by NAGIL in SL and the consequences, which were created for the
continuous loss of the company. In the next case, it is required to figure out the consequences
of NAGIL for taking charges of VBCL as they failed to repay the loan amount allocated to
them. Coming up next, it is required to figure out what the consolidation consequences will
be in case no profit is generated from the business of MSCL. In the last instance, it is asked to
figure out the consolidation consequences of NAGIL for managing the business of CrossRU
(Sapozhnikova and Mohammed 2014).
Rules of the Accounting Standard Applicable
In paragraph 1 of AASB 10, it is stated that an entity should disclose the consolidated
financial statement of it if the entity is liable for controlling the business of two or more
companies (Uyar 2016).
As it is stated in the paragraph 5 of AASB 10, the investor should disclose the actual
status of the investee and the overall control gained by the controller over the entity. In
paragraph 6 and 7 of AASB 10, it is stated about the control of the investor that they can

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imply over the investee. According to this paragraph, the investor can control over the
investee in case of the investor do have the power over the investee, can affect the amount of
return of the investee or by having the right or exposure over the variable return of the entity.
In paragraph 9 of AASB 10, it is stated that the investor cannot direct over the investee if
another separate investor is associated with the administrative activities of the investee (Ni
and Van Wart 2015). In such cases, the interest gained from the investee should be accounted
by investor in accordance with the legislations which are stated in the standards like AASB
128, AASB 9 and AASB 11 (Raiborn and Sivitanides 2015).
In this segment, it is required to consider the power of an investor over the investee as
per the legislations stated in AASB 10. In paragraph 10, it is stated that having the right or the
exposure of being able to direct the relevant activities of the entity which can affect the return
is considered as a power. This power can be obtained directly or indirectly by the investor. In
paragraph 13 of AASB 10, it is stated that if the right to control the relevant activities of the
entity is being divided between two investors, the power of the entity will be obliged to the
one who has the most significant affect over the return of the investee. In accordance with
this, it should be mentioned in this regard that the legislation stated in paragraph 16 of AASB
16, there can be several beneficial of an investee, but the major power of the entity is
controlled by one investor. The entities which work as a non controlling holder of the entity
only share the amount of profit of the investee (Maas et al. 2016).
Application of the Accounting Standard
a)
In the first case, it can be seen that NAGIL has allocated a loan to SL. But for some
reason, SL was unable to pay the loans. Thus NAGIL took over 70% of the shares of the
company. But this only allowed NAGIL to get a fair amount of profit (or loss) of the
company as the investor did not participated in the governing body of the company. As stated
in the paragraph 7 of AASB 10, as the investor do not have the authority to control the
relevant activates of the firm, the preparation of the consolidated financial statement is not
required in this case (Aburous 2016).
b)
For the next case, it is required to figure out whether NAGIL needs to prepare the
consolidated financial statement of the firm. In this case, the entity has taken over all the

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controls of VBCL in terms of all the financial decisions of the company for next four years.
The company has the power, right and exposure over the investee and thus, in accordance
with AASB 10, the company needs to prepare the consolidated statement for this company
(Kushnirenko 2017).
c)
In the next segment, it is required to consider the consolidation consequences of
NAGIL in case of MSCL. As it is stated in the case study, the business of MSCL is governed
by two separate entities, which are NAGIL and SPL. On the basis of a agreement signed
between them, it is stated that NAGIL will provide all the finances required in the business
on a basis of loan and SPL will provide the necessary administrative expertises in return of a
management fee. In this case, it can be seen that SPL has more administrative power in terms
of controlling the business of MSCL. Thus, as it is stated in paragraph 9 of AASB 10,
NAGIL cannot claim the control over MSCL and thus, will not have to prepare any
consolidated financial statement.
d)
In the last case, though NAGIL does not hold the majority of shares in CrocsRU, they
take all of the administrative decisions. Though Tom and Marjory watch over the business,
but in accordance with paragraph 9 of AASB 10, the control of CrocsRU will be
implemented upon NAGIL and the company will have to disclose the necessary data
regarding the investee in their consolidated financial statement (Duff 2016).
Conclusion
From the given analysis, it can be seen that the company needs to prepare the
consolidated financial statement for VBCL and CrocsRU as the control of these investees lies
in the hands of NAGIL. But in case of SL and MSCL, the company do not have to prepare
the consolidated financial statement as the control of these two companies are not obliged by
NAGIL.

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