Corporate and financial accounting

Running head: Corporate and financial accounting
Corporate And
Financial Accounting

Corporate and financial accounting
1
Executive Summary
AASB 3 Business Combinations was formulated with an aim to improve the comparability,
relevance and reliability of the data provided by a company in its financial records in the
context of a business combination and its impact. AASB 10 Consolidated Financial
Statements was formulated with an objective to present and prepare the consolidated
financial statements when one or more entities are controlled by an entity. AASB 128
Investments in Associates and Joint Ventures advice the accounting methods for investing in
associates along with setting the need for implementation of equity methods while accounting
for investments in joint ventures and associates. This report explains the concepts of
business combinations, various acquisition methods, non-controlling interests and intragroup
transactions along with the use of applicable accounting standards to various case studies.

Corporate and financial accounting
2
Contents
Introduction........................................................................................................................... 3
Part A................................................................................................................................... 3
Part B................................................................................................................................... 5
Part C................................................................................................................................... 8
Recommendations/Conclusion............................................................................................... 11
References.......................................................................................................................... 12

Corporate and financial accounting
3
Introduction
This report deliberates upon the various issues including business combinations, acquisition
methods, intragroup transactions and non-controlling interests through the application of
various accounting standards. Part A explains the difference between Consolidation
Accounting and Equity Accounting in reference to AASB 3 Business Combinations, AASB 10
Consolidated Financial Statements and AASB 128 Investments in Associates. Part B explains
the treatment of intragroup transactions through AASB 127 Consolidated and Separate
Financial Statements and AASB 10 Consolidated Financial Statements. Part C determines
the impact of NCI disclosure requirements as a distinct item in the process of consolidation
with reference to AASB 127 Consolidated and Separate Financial Statements and AASB 101
Presentation of financial statements.
Part A
The key differences between consolidation accounting and equity accounting using AASB 10
Consolidated Financial Statements, AASB 3 Business Combinations and AASB 128
Investments in Associates and Joint Ventures are as follows:
The term Consolidation pertains to aggregation. As per AASB 10, the financial records of a
group in which equity, income, assets, liabilities, cash and expenses of a parent and its
subsidiaries are presented as a single entity. A single set of financial statements are prepared
in this regard. It also involves the combination of financial records of all the individual
companies in a group by adopting the line by line method. It combines similar items of assets,
equity, income, liabilities, expenses and cash flows of the companies in a group( Australian
Accounting Standards Board, 2015a).
It shows the overall financial performance of a group. It is presented if they are a single
economic entity. However, it does not involve the adjustments in the accounts of the
companies. The Consolidated Financial Statements are an extra set of financial statements.
They are prepared in a consolidated worksheet (Vašek and Gluzová, 2014).
Particulars A Ltd
(Separate
Financial
statement )
B
Ltd(Separate
Financial
statement )
Group
(Consolidated
Financial
statement )
Land 150000 + 120000 = 270000
Inventory 50000 + 20000 = 70000
Total Assets 200000 140000 340000