Corporate and Financial Accounting

Running head: Corporate and Financial Accounting
Corporate and
Financial Accounting

Corporate and Financial Accounting
1
Executive Summary
AASB 101 Preparation of Financial Statements was formed with the aim to make sure that the
financial statements of an entity with regards to the previous periods and with the other
entities should be comparable. They set the requirements for presenting the financial
statements, the framework of their structure and requirements which are minimum for their
content. Whereas AASB 3 Business Combinations was developed for improving the
significance, dependability and comparability of the information furnished by the corporation in
its financial statements with reference to its various business combinations and their impact.
So, this report deliberates upon the issue of various business combinations, non –controlling
interests, intragroup transactions and acquisition methods along with the applicability of
accounting standards on various case studies which are mentioned hereunder.

Corporate and Financial Accounting
2
Contents
Introduction.................................................................................................................................3
Part A..........................................................................................................................................3
Part B..........................................................................................................................................5
Part C..........................................................................................................................................8
Recommendations/Conclusion.................................................................................................10
References................................................................................................................................11

Corporate and Financial Accounting
3
Introduction
Part A of the report describes the issues related to business combinations, intragroup
transactions, acquisition methods and non-controlling interests by applying various
accounting standards. It explains the difference between Equity Accounting and
Consolidation Accounting in the context of AASB 128 Investments in Associates and AASB
3 Business Combinations .The treatment of intragroup transactions is explained in AASB 127
Consolidated and Separate Financial Statements along with AASB 10 Consolidated Financial
Statements. Part C defines the influence of disclosure requirements of NCI as a separate item
in the consolidation process with regards to AASB 127 Consolidated and Separate Financial
Statements and AASB 101 Presentation of Financial Statements.
Part A
According to AASB 10, the financial records of the group are presented as a single body in
consolidation accounting. The assets, equity, cash expenses and liabilities of all the
subsidiaries are merged and presented in the consolidated financial statements. In this
context, a single set of statements is prepared. Line by line method is adapted for combining
the financial records of all the individual firms in a group. The related items of equity, assets,
income, liabilities, cash flows and expenses are combined together (Compiled AASB
Standard AASB 10, 2015).
It does not involve adjusting the accounts of companies and shows the total performance of a
company. The financial accounts depict the entity along with its subsidiaries as one economic
entity. The consolidated financial statements are a supplementary set of financial records
and shall be prepared in a consolidated worksheet (Gluzová, 2016).
The major differences between equity accounting and consolidation accounting by applying
AASB 3 Business Combinations, AASB 128 Investments in Associates and Joint Ventures
and AASB 10 Consolidated Financial Statements are as follows:
Particulars E Ltd
(Separate
Financial
statement )
F
Ltd(Separate
Financial
statement )
Group
(Consolidated
Financial
statement )
Land 100000 + 100000 = 200000
Inventory 500000 + 200000 = 700000
Total Assets 600000 300000 900000
Borrowings (70000) + (30000) = (100000)