Financial Accounting: Consolidated Statement of Financial Position and Relevance, Reliability, and Comparability of Financial Information

FINANCIAL ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
QUESTION- 1.................................................................................................................................1
a) Consolidated statement of financial position for the Pee Group as at 31st December, 2020..1
b) Relevance, reliability and comparability impacting the financial information and making it
more useful...................................................................................................................................2
QUESTION- 2.................................................................................................................................4
a) I) Financial performance of Patrick Financial Services...........................................................4
II) Non-financial information giving the indication of future success........................................5
b) Importance of professional ethics in accounting.....................................................................7
Fundamental principles of professional ethics for accountants...................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial accounting is the process of recording, summarizing and interpreting the
financial position of the business through the preparation of the financial statements of the
company. Such financial statements are used by the internal and external users to analyse the
performance of the business and based on the insights take the meaningful decisions associated
with the company. Apart from the financial perspective the non-financial perspective of the
business is also important to seek the useful data pertaining to the results generated by the
company. The customer oriented approach, long term growth and development plans and
innovations that help the business survive in the market are some critical aspects of the business
that shows wider picture related to the entity. The current project shall be showing the
preparation of the consolidated financial statements of the business with the acquired subsidiary.
Further it shall be showing the detailed explanation related to the balance scorecard and on the
basis of that the comments can be made on the performance of the business in the financial and
non-financial terms.
MAIN BODY
QUESTION- 1
a) Consolidated statement of financial position for the Pee Group as at 31st December, 2020
Particulars Amount
Non – current assets
Property plant and equipment (160000 + 50000) 210000
Goodwill 20000
230000
Current assets (30000 + 10000) 40000
Total assets 270000
Equity and liabilities
Ordinary share of £ 1 each 100000
Retained profits 158000
Non – controlling interest 12000
Total of Equity and liabilities 270000
Working notes:
Net assets of the Cee plc (Subsidiary Co.)
Particulars At acquisition (on At Reporting date (31 Post - acquisition
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December 2018) December 2020)
Equity shares 20000 20000
Retained earnings 30000 40000 10000
Fair value of the
net assets
50000 60000 10000
Value of Non – controlling interest at acquisition
= Fair value of net assets at acquisition * % of NCI = 50000 * 20% = 10000
Goodwill = Fair value paid by parent on acquisition of controlling interest + fair value of NCI at
acquisition – Fair value of net assets on the date of acquisition
Goodwill arises on consolidation = 60000 + 10000 – 50000 = 20000
Group retained earnings to be shown in consolidated statement of financial position
Pee Ltd. (parent)’s retained earnings as on 31 December 2020 + % share of post - acquisition
profit of Cee Ltd. (Subsidiary)
= 150000 + 80% of 10000 = 158000.
So, there are certain terms that has been used for the purpose of preparing the above
consolidated statement of financial position for the group, where the Pee Plc has obtained 80%
share in the Cee Ltd., therefore Pee ltd. becomes the parent of Cee Ltd. and accordingly Cee ltd.
becomes Subsidiary of Pee Ltd (Inuwa and Baraya, 2017).
NCI calculation for the date of reporting that is, 31 December 2020
= Opening NCI on 31 December 2018 + NCI % share of profit arises on post – acquisition
= 10000 + 20% of 10000 = 12000.
The consolidated financial statements as prepared by the company is a group statement
that includes the data pertaining to the subsidiary of the company. All the income and expenses,
assets and liabilities of the business are ascertained in the combined manner and accordingly the
value of goodwill and non-controlling interest of the company is ascertained by the company.
b) Relevance, reliability and comparability impacting the financial information and making it
more useful
The financial statements of the company are prepared in accordance with the
International Accounting Standards Board (IASB) and the Conceptual Framework that is
prescribed by them. There are some qualitative characteristics as prescribed by this framework
that shall be leading to the proper preparation of these financial statements and the representation
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