Corporate Takeover Decision Making and Effects on Consolidated Accounting

Running head: CORPORATE TAKEOVER DECISION MAKING AND EFFECTS ON
CONSOLIDATED ACCOUNTING
Corporate takeover decision making and the effects on consolidated accounting
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Author Note

CORPORATE TAKEOVER DECISION MAKING AND EFFECTS ON CONSOLIDATED
ACCOUNTING
Executive summary:
The report addresses the differences in methodology of equity and consolidation accounting
in event of acquisition of one firm by larger. All the accounting treatments concerning the
acquisition have been explained and descried with reference to different AASB. When
reference to the two methods of accounting, it can be concluded that there is considerable
differences in both the methods. Regarding the intra group transactions, it is required to
eliminate all the effects of components of financial statements in preparing consolidated
financial statements. In addition to this, disclosure requirement of NCI impacts the process of
consolidation as it helps in more fair presentation of the items in the consolidated financial
statement.

CORPORATE TAKEOVER DECISION MAKING AND EFFECTS ON CONSOLIDATED
ACCOUNTING
Table of Contents
Introduction:...............................................................................................................................4
Answer to Part A:.......................................................................................................................4
Identifying the key differences in methodology between consolidated accounting and equity
accounting:.................................................................................................................................4
Answer to Part B:.......................................................................................................................6
Explanation of treatment of intra group transactions:................................................................6
Answer to Part C:.......................................................................................................................8
Discussion of the effect of the NCI disclosure requirements in the consolidation process as
separate item:.............................................................................................................................8
Identifying the changes required to be made for correctly stating the consolidated financial
statement:...................................................................................................................................9
Evaluating the effect of disclosure requirement in the consolidated financial statement:.......10
Conclusion:..............................................................................................................................11

CORPORATE TAKEOVER DECISION MAKING AND EFFECTS ON CONSOLIDATED
ACCOUNTING
Introduction:
The report is prepared to gain an understanding of the several accounting aspects in
relation to the acquisition of smaller company by JKY Limited. Analysis of different
accounting aspects is based on the case study provided where JKY limited is proposing to
takeover one company named FAB Limited. The report intends to evaluate the best
acquisition strategy by outlining the key differences between the proposed methods of
acquiring the business. The intra group transactions and the accounting treatment have also
been outlined. Furthermore, the disclosure requirement of non controlling interest in the
process of consolidation is also evaluated with reference to the particular accounting
standard.
Answer to Part A:
Identifying the key differences in methodology between consolidated accounting and
equity accounting:
This section seeks to evaluate the key differences in the methodology between the
equity accounting that is the acquisition of FAB Limited by acquiring the equity shares and
thereby acquiring significant influence and direct purchasing. The acquisition method under
the AASB 9 requires the entity to determine the date of acquisition, measure and recognize
the goodwill and the identifiable assets acquired, any non controlling interest and liabilities
assumed. Under the consolidated accounting, the financial results of the parent and subsidiary
entities are combined together. Consolidated financial statements combine the financial items
such as equity, liabilities, assets, cash flow and expenses of the subsidiary with the parent