Corporate and Financial Accounting: Fundamentals of Business Combination Methodologies, Acquisition Methods, and Intragroup Transactions

Running head: Corporate and financial accounting
Corporate and financial
accounting

Corporate and financial accounting
1
Executive Summary
This report aims to explain the various fundamentals of business combination methodologies,
acquisition methods along with intragroup transactions with regards to non-controlling
interests with the help of applicable accounting standards to various case studies mentioned
hereunder. In this regard, AASB 3 Business Combinations was developed with the intent to
enhance the relevance, consistency and comparability of information provided by the
company in its consolidated financial statements.AASB 10 Consolidated Financial Statements
was articulated with the aim to present and prepare the combined financial statements while
one or more subsidiaries are managed by the company. AASB 128 Investments in Associates
and Joint Ventures suggest the accounting methodologies in order to invest in associates
along with setting the necessity for applying the methods of equity along with accounting for
investments in joint ventures and associates.

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
This report discusses the issues relating to business combinations, intragroup transactions,
methods of acquisitions along with non-controlling interests by applying various accounting
methods. Part A discusses the difference between the Equity Accounting and Consolidated
Accounting by applying AASB 3 Business Combinations, AASB 128 Investment in Associates
and AASB 10 Consolidated Financial Statements. Part B deliberates upon the treatment of
intragroup transactions by applying AASB 10 Consolidated Financial Statements and AASB
127 Consolidated and Separate Financial Statements. Part C explains the influence of
requirements with regards to NCI disclosure as a separate item in the procedure of
consolidation in the context of AASB 101 Presentation of financial statements and AASB 127
Consolidated and Separate Financial Statements.
Part A
The major differences between equity and consolidated accounting with reference to AASB 3
Business Combinations, AASB 10 Consolidated Financial Statements and AASB 128
Investments in Associates and Joint Ventures are as follows:
The term Consolidation connotes combination. According to AASB 10 in consolidation
accounting, the income, equity, assets, cash, liabilities and expenses of a parent company
and its subordinate companies are stated as one entity in fiscal records of the group. A set of
financial records are prepared in this context. Additionally, the financial records of all the
subordinate companies are consolidated in a group by applying the line by line methodology.
This method combines the like items of income, equity, assets, liabilities, expenses and cash
flows of all the corporations in a group (Australian Accounting Standards Board, 2018a).
It reveals the entire economic performance of the group. The fiscal performance of a group is
illustrated as if it is a single economic entity. But the adjustments in the accounts of
companies are not involved in it. These are an additional set of financial statements and are
prepared in a combined worksheet (Müller, 2014).
Particulars X Ltd
(Separate
Financial
statement )
Y
Ltd(Separate
Financial
statement )
Group
(Consolidated
Financial
statement )
Land 200000 + 200000 = 400000
Inventory 500000 + 200000 = 700000
Total Assets 700000 400000 1100000