Corporate Takeover Decision Making and the Effects on Consolidation Accounting

CORPORATE TAKEOVER DECISION MAKING AND THE
EFFECTS ON CONSOLIDATION ACCOUNTING
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Executive Summary
For achieving a better approach of corporate decision making by the JKY ltd, consolidated
financial accounting plays a vital role over it. This affects the business of the parent as well as
the subsidiary firm effectively. On the other hand, the non controlling interest rate also affects
the business of JKY ltd with different aspects. In this regards, the firm has to make effective
consideration for share of the shareholders and the owner for the decision making approach of
the business. For the shareholders having a lesser amount of share than 50% cannot make the
decision for the consolidated financial accounting. For a better performance over the
consolidated accounting, the firm also has to make improved consideration for well-stated
consolidated accounts.
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Table of Contents
Introduction......................................................................................................................................4
Part A...............................................................................................................................................4
Acquisition options for JKY Ltd..................................................................................................4
Part B response................................................................................................................................5
Consolidated and Separate Financial Statements in reference to AASB 127 and AASB 10......5
Affect on NCI...............................................................................................................................6
Part C response................................................................................................................................7
Required changes in consolidation financial statement...............................................................7
NCI disclosure..............................................................................................................................9
Conclusion.......................................................................................................................................9
Reference list.................................................................................................................................10
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Introduction
In this competitive market, consolidation of financial statement helps to determine the
accounting situation of the firm. This, however, non-controlling interest helps to bear the
situation for the decision-making approaches of JKY ltd. The decision making approach for the
firm requires to have more than 50% share of the decision maker. Consolidated accounting
process is also effective for managing the accounting standard of the firm effectively. AASB 127
and AASB 101 govern the accounting standard of the firm effectively. Moreover, the firm also
requires ensuring well-stated consolidated accounting in managing the accounting standard of
Australia with more efficacies.
Part A
Acquisition options for JKY Ltd
In relation to the current case study, JKY Ltd proposes to take over the FAB Ltd, whereby proper
acquisition method needs to be approached. In terms of the proposed methods, two acquisition
methods have been suggested; purchase/acquisition method and share acquiring method through
“significant influence”.
In relation to the purchase acquisition method, the JKY Ltd Company may treat the FAB Ltd as
its asset in the financial projection, whereby the company can use the fair value of the FAB Ltd
in the balance sheet. Therefore, if the interest can be pooled in between the FAB Ltd and the
JYK Ltd, all the liabilities and assets of JYK Ltd will be netted using the fair value, however, no
goodwill outcomes can be seen from the transaction. On the other hand, as the JYK will have no
goodwill to write off, therefore, the company can earn high future earnings. On the other hand, in
terms of approaching the purchase/acquisition method, the JYK Ltd will have control over the
financial policies and decisions of the FAB Ltd, which can be used for JYK as an asset in order
to gain profits (AASB, 2015).
In terms of significant influence, JYK Ltd may achieve the power to represent in the board of
directors or other similar governing meetings of the FAB Ltd. JYK Ltd can be appeared in the
process of policy making along with other decisions of distributions. Both companies could
exchange materials along with essential information of technology. Even JYK Ltd. can change
the managerial staff of the FAB Ltd.
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