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
There are three parts of the report. The first part states that the presence of major
accounting principles leads to the difference in the methods of consolidation accounting
and equity accounting. The second part shows that the companies are required to
consider differences in the intra-group transactions in the consolidated financial
statements of the same firms. The third part shows that there is major impact of these
disclosures on the consolidated financial statements.

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

3CORPORATE AND FINANCIAL ACCOUNTING
Introduction
This report intends to discuss about different acquisition related aspects from the
provided scenario of the acquisition of FAB Limited by JKY Limited. Discussion about
the prime differences between the methods of consolidation accounting and equity
accounting in consolidation is the main aim of the first part of the report. Analysis of the
major principles of the intra group transactions in the presence of proper application is
the aim of the second part of the report. Analysis of the effects of non-controlling
interest related disclosures are the aim of the last part of the report.
Response to Part A
There are two methods of joint venture or acquisition; they are the equity method
and consolidation method. Selection of either of these methods depends on the
reporting of income statement and balance sheet in the partnership. The presence of
certain difference in the methodology of these two methods can be seen and they are
discussed below.
Consolidation Method – Under this particular method, it is needed to record the assets
and liabilities in the company’s balance sheet on the basis of the involvement
percentage maintained by the partners in the partnership (Milojević, Vukoje and
Mihajlović 2013). All the acquisition related incomes and expenses are recorded and
they need to be reported in the income statement as well as balance sheet while
undertaking the calculation of the assets and liabilities. The process of business take
over should take into account certain important economic substances which are assets,
liabilities, income, expenses and equity of the parent company and its subsidiaries and
this piece of information is available in AASB 10(aasb.gov.au 2019). This consolidation
method demands the whole elimination of the investment’s carrying value of the parent
and subsidiary company along with the portion of the equity capital of the subsidiary
held by the parent company. Elimination adjustments entries need to be conducted in
this method for the elimination of the intercompany transactions with the aim to
eliminate the scope of double counting of the values in consolidation.
It is needed for the parent companies to adopt the strategy to measure the
financial statements’ line items. Moreover, the parent companies are needed to take
into account the assets, liabilities, incomes and expenses at the date at which they were
acquired (Ratiu and Tudor 2013). Companies can access this information in the
standards of AASB 10. Paragraph 32 of AASB 10 provides the particular process for
goodwill recognition where the acquirer is required to make goodwill recognition at the
date of acquisition between the higher of the below two conditions (aasb.gov.au 2019).
A. It is needed to take into consideration the following condition’s aggregate –
 The transfer consideration which has been estimated where it is needed to use
fair value at the date when it was acquired as per AASB 3;
 The acquiree’s gauged valued of non-controlling interest; and.