Corporate and Financial Accounting

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

1CORPORATE AND FINANCIAL ACCOUNTING
Executive Summary
The findings of the analysis indicates towards the fact that the companies are needed to
consider different principles of recognition as well as measurement at the time of the
acquisition of smaller companies and this can be seen due to the difference between
the methods of equity accounting and consolidation accounting. The findings of the
report also shows that major differences need to be undertaken for the intra-group
transactions in the same companies’ consolidated financial statements.

2CORPORATE AND FINANCIAL ACCOUNTING
Table of Contents
Introduction........................................................................................................................3
Part A.................................................................................................................................3
Part B.................................................................................................................................5
Part C.................................................................................................................................6
Conclusion.........................................................................................................................8
References.........................................................................................................................9

3CORPORATE AND FINANCIAL ACCOUNTING
Introduction
The main objective of this report can be found in gaining knowledge of various
accounting substances having relation with the acquisition of FAB Limited by JKY
Limited. Providing the necessary description and other information on the consolidated
accounting method and equity accounting method is the main objective of the report’s
first part. The second part of the report aims at discussing the key principles of intra-
group transactions with the help of proper examples. The last part of the report involves
in discussing the effects of the disclosures connected with the non-controlling interests
in the consolidation process.
Part A
In the process of joint ventures, the use of consolidation and equity methods can
be seen. The nature of reporting the income statement and balance sheet in the
partnership determines the selection of appropriate method which implies that there is
difference in the methodology of these two methods.
Consolidation Method of Accounting
This particular method demands the recording of the joint venture’s assets and
liabilities in the balance sheet as per the proportion of percentage of involvement that
the companies have maintained in the partnership. This particular method indicates
towards the major responsibility of the firms towards recording the acquisition process
related incomes and expenses; after that, the developed financial statements must
include these incomes and expenses. The standards of AASB 110 have provided the
companies with the view on what financial substances need to be taken into
consideration from the financial statements of the parent company and its subsidiary
companies; and these financial elements are assets, income, liabilities, expenses and
others (aasb.gov.au 2019). Both the carrying value of the investments of the parent as
well as its subsidiaries and the part of equity of the subsidiaries that the parent company
holds are eliminated in this method. Moreover, this method involves in elimination
adjustment with the aim to eliminate intercompany transactions so that double counting
of the values can be avoided in consolidation process (Lombrano and Zanin 2013).
It can be seen from the standards of AASB 10 that that it is needed for the
companies to comply with the necessary bases to measure different financial items of
the financial reports and the companies are needed to consider the realized value as
the basis for the income and expenses; and fair value is used for measuring these items
(Milojević, Vukoje and Mihajlović 2013). There is a particular criterion for recognizing the
goodwill as per AASB 10, Paragraph 32. It is required for the management of the
acquirer business organization to take into account the greater condition of below
provided conditions in order to measure and recognize the goodwill:
1st Condition: The aggregate of –