EXECUTIVE SUMMARY The main objective of this particular

EXECUTIVE SUMMARY
The main objective of this particular assignment is extension of knowledge in the
field of various Australian Accounting Standard Board (AASB) i.e. AASB 3: AASB
3: Business Combinations, AASB 128 Investments in Associates and Joint
Ventures and AASB 10 Consolidated Financial Statements, to AASB 127
Consolidated and Separate Financial Statements and AASB 10 Consolidated
Financial Statements, AASB 127 Consolidated and Separate Financial Statements
and AASB 101 Presentation of Financial Statements and how the accounting is to
be done in the relevant books of accounts of the company.

Contents
EXECUTIVE SUMMARY..........................................................................................1
INTRODUCTION....................................................................................................3
PART A.................................................................................................................3
PART B.................................................................................................................4
Calculation of consolidated revenue.......................................................................5
Calculation of Consolidated cost of sales................................................................5
Mutual Set off..........................................................................................................5
Valuation of inventory.............................................................................................5
PART C.................................................................................................................5
Calculation of goodwill/bargain purchase...............................................................6
Calculation of profit attributable to NCI..................................................................7
CONCLUSION........................................................................................................7
References..............................................................................................................8

INTRODUCTION
The assignment deals with accounting under various situations like accounting
under consolidation accounting and Equity accounting, how the intra group
transaction between the two companies should be recorded. The brief description
regarding the non-controlling interest disclosure requirement as a separate part
in the consolidation process. The effect of the various Australian Accounting
Standard on accounting aspect of the entity.
PART A
Business Combination is quite a happening phenomenon in today’s corporate
world. In order to provide it an acceptable accounting sanctity AASB 3: Business
Combinations has been framed which provides that the transfer of control of an
entity to another through a transaction between two parties is the essence of a
business combination. ( Commonwealth of Australia 2015, 2015) However, the
synergies achieved by a business combination have to be brought into books
which is charted out in AASB 10: Consolidated Financial Statement. As per this
standard an entity is said to be having control over another entity if it
participates in its equity-oriented returns.
Now, there are two methods of accounting prescribed for reporting such
transactions - “Consolidation Accounting” and “Equity Accounting”. There is a
major reporting difference between these two methods in the context that while
in consolidation accounting the parent’s financial statements and the subsidiary’s
statements are combined to prepare the results of the entire group but in equity
accounting the investment in the subsidiary is shown as a single line item in the
parent’s financial statements. The choice between the two is mostly entity
specific and at times situation specific as well. For instance, an entity may prefer
to save the trouble of preparing detailed records as required by consolidation
accounting for purchase consideration, non- controlling interest, the goodwill
acquired etc. However, in case of substantial control acquired such detailed
reporting is preferable as the magnitude of the stakes are quite high in that
respect. The equity method of accounting is certainly less cumbersome but it
fails to report the finer details involved in such transactions as aforementioned.
So, in order to resolve this dilemma, the emphasis is placed on the magnitude of
control. Generally, consolidation accounting is preferred for stakes above 50%.
To have a clearer picture of the complex aspects of these two methods, let us
take the following scenario:
Suppose Company A acquired 35% stake in Company B which is worth 1 billion
dollars. So, it incurred an outflow of $350 million from its resources.
Now, going by the equity method the investment of $350 million would be
reported in co. A’s balance sheet as an asset. Company A is entitled to a dividend
of 35% from B which can be reported as an income in its financial statements.
Correspondingly, the value of the investment will also go up due to the income