Consolidation of Financial Statements and Deferred Tax Balance

This article discusses the consolidation of financial statements and deferred tax balance. It explains the accounting principles and standards for financial reporting, including AASB 1024, AASB 1013, AASB 1015, AASB 1010, and AASB 1020. The article also covers the definition of control, the need for consolidation, and the calculation of non-controlling interest. The deferred tax balance is explained in detail, including its calculation and the accounting treatment for it. The article concludes with references to relevant sources.

Part- A
FMCG Ltd gains 85% portions of RG Ltd to expand its activity in Australia. Moreover, RG Ltd
has been procured after the accounting time frame as on 30th June 2019. They are announcing
the solidification accounts for the advancement of financial explanation of the monetary
substance. (https://www.accaglobal.com, 2019) This is to bring consistency crosswise over
organizations' book of accounts. Such acquisitions it obligatory for the organizations to pursue
endorsed rules according to Australian Accounting Standard Board 1024 for the correct
conclusion of books. (AASB, 2017) For the year shutting down on 30th June 2019 after
fundamental alterations are required to be made in the books of FMCG Ltd as per Australian
Accounting Standard Board 1024.
Books of World Retailing Ltd
Date Particulars Amount (Dr) Amount ()
30-Jun-19 Investment in Stock of RG Ltd
To Business Purchase
$538050
$538050
30-Jun-19 Lump sum business
purchase of Business
To
Share capital Account
Retained earnings Account
Goodwill impaired Account
Goodwill Account (BF)
$$538050
170,000
144,500
5000
218550
As per working note-1

30-Jun-19 Plant Account Dr
To
Cost of control account
Non-controlling interest account
80000
68000
12000
As per working note-2
30-Jun-19 Investment in Stock of Adelaide Retailing
Ltd Dr
To
Dividend Received Account
138000
138000
Dividend Received on Investment in Stock of RG Ltd
30-Jun-19 Sales Account Dr
To
Merchandise Inventory Account
110000
110000
Inter Sale Transaction ($60000+$50000) = $110000
30-Jun-19 Income Account Dr
To
Investment in Stock of Adelaide
Retailing Ltd
26000
26000
Adelaide Retailing paid $26000 in management fees to World Retailing
30-Jun-19 Income Account Dr
To
Plant Account
40000
40000
Working Note 3

30-Jun-19 Income Account Dr
To
Depreciation Account
6,667
6,667
Working Note 4
30-Jun-19 Income Account Dr
To
Merchandise Inventory Account
7000
7000
Working Note 5
30-Jun-19 Deferred tax Assets Account Dr
To
Income Tax Account
2100
2100
Working Note 6
Workings
Working Note 1
Calculation of Goodwill for
FMCG Ltd
RG Ltd 100% 85%
Share capital $200,000 $170,000
Retained earnings $170,000 $144,500
$370,000
Share of FMCG Ltd @85% (A) $314,500

Business Purchase (B) $538,050
Goodwill (B-A) $223,550
Goodwill impaired -$5,000
Goodwill $309,500
Working Note 2
Revaluation of Plant
Plant upward Revaluation by
$80000
Share of FMCG Ltd @85%
of 80000
$68,000
Share of RG @15% $12,000
$80,000
Working Note 3
Reversal calculation for Unrealized profit on the sale of
non-current assets.
Sale was made by the parent company, (FMCG Ltd) to (RG
Ltd) reported unrealized profit. Hence, the amount has to be
reversed by making by following amount in the following
entries
Book value $132,000
Accumulated Depreciation $52,000
Carrying Amount in books $80,000
Sale price for RG Ltd $120,000

Profit on sales (need to be
reversed)
$40,000
Working Note 4
Overcharged of Depreciation
by RG Ltd Calculate: Profit
on plant/ Use life Remaining
Profit on plant $40,000
Use lifeRemaining 6 years
Depreciation Method applied SLM
Depreciation overcharged $6,667
Working Note 5
Elimination of Unrealized profit on the stock World
Retailing acquired inventory from RG
Closing Inventory as on 30th
June 2019
$33,000
Cost value of Closing
Inventory as on 30th June
2019
$27,000
Unrealized profit on the
closing stocks
$6,000
Opening Inventory as on
30th June 2019
$40,000
Cost value of Opening
Inventory as on 30th June
2019
$33,000
Unrealized profit on the
Opening stocks
$7,000

Working Note 7
Tax expense with respect to unrealized profit on inventory
As per Working Note 6
Unrealized profit on the
Opening stocks
$7,000
Tax Expense @ 30% $2,100
Calculation of non-controlling interest
Acquisition cost 538050
Non controlling interest fair
value2
170000
Total fair value 708050
Less:
Book value of assets 633000
Management Fee Expense 26000
Administration Expense 40000
699000
Goodwill 9050
FMCG Goodwill 5000

Goodwill to non controlling
interest
4050
Part-B
Deferred Tax Balance
The Economic element is characterized according to the component which mirrors the in its
financial reports. The financial situation of the principle organization, as well as alongside it, is
different auxiliaries and related organizations (FRD, n.d). According to the accounting guidelines
characterized accounting, and revealing of such elements are finished by business mix IFRS 3 or
AASB 1024 or IAS 27(ACCA, n.d). At the point when the parent substance holds a possession
enthusiasm for an auxiliary organization over half of controlling right, it prompts coming into the
ambit of combination accounts. According to the standard, it winds up most vitally essential to
make joined reports independent of the way that individual accounts are being kept and exhibited
for the legitimate revealing of financial articulations.

To get immediate, such articulations, combination modifications are fundamentals, and these
alterations are significantly on account of the arrangement of the books of accounts. The net
impact of the put sum is to be invalidated in the gathering outline. Further, different creations are
finished with the help of different other accounting principles. Accounting models which help in
support of real report investigation can be laid.
AASB 1013: Accounting for Goodwill and AASB 1015: Accounting for the Acquisition of
Assets Accounting Standard AASB 1010: Accounting for the Revaluation of Non-current Assets
Accounting Standard AASB 1019: Measurement and Presentation of Inventory Accounting
Standard AASB 1020: Accounting for Income (Tax-impact Accounting).
Accounting for Income Taxes (Tax-impact Accounting) AASB 1020 treats the accounting of tax
portion regarding current tax and deferred tax alteration about resources and liabilities alongside
the required provisioning. The point to be noted is that the deferred tax isn't good tax figuring
done by benefit and misfortune accomplished. It is an accounting measure idea done on the
accumulation premise. The deferred tax is determined to set off the brief, and lasting contrasts
were emerging because of time impact like exchanges (AASB, 2017). This shows up when there
is an alternative accounting treatment with a point of view of accounts and an alternate one on
taxation. On account of gathering statements, the deferred tax being an accounting acclimation to
mirror the excellent and reasonable perspective on the organization's financial revealing. The
revelation in the books of accounts and changes in explanations will be done as thinking about
the substance as a monetary element.
Consequently, if anyone organization mirrors this alteration, the section will be evident in the
gathering accounts. Along these lines, however, the holding organization FMCG Ltd didn't have

a deferred tax alteration. RG Ltd had an accounting change regarding the deferred tax on the year
shutting. Henceforth it's anything but an aggravating circumstance and a typical accounting
procedure to express an exact revealing. Subsequently, it will show up in the solidification
detailing for the genuine and reasonable perspective on the accounting articulations. Australian
Accounting Standard Board (2012)
Consolidation of Financial Statements
As indicated by the Australian Accounting Standard Board 1024 union accounts, parent
substance holds a proprietorship enthusiasm for an auxiliary is dictated by the comprehension of
the meaning of control, which depends on AASB1024. The monitor is characterized when the
more significant part of the democratic privileges of one element is in the intensity of the other
entity (AASB,1992). Besides, to name or evacuate the lion's share of the individuals from the
board, to cast most of the votes at chiefs' meeting. When one element has such right to make and
furthermore structure for the benefit of the working society of the association depend on
everyday exercises or long haul choices. It is named to be in a controlling position, in this way,
keeping up the ideas of union accounts Moreover, it isn't vital that such two elements ought to be
from a similar industry. The need to pursue joined accounts idea is because the whole
association's book of accounts is kept up with the comprehension of an equivalent accounting
hypothesis and head. It helps for the inside clients also outer gatherings to comprehend the
accounting and financial situation of the monetary element all the more rapidly.
Henceforth, FMCG Ltd having a prime business as a retailing organization, obtains 85% of the
portion of RG Ltd having a great company as a development organization increase a controlling
right by more than 50%. Therefore comes into the ambit of announcing financial accounts
according to combination reports. Along these lines, both being from an alternate industry

doesn't hold high and in this way, will be dealt with one monetary element for solidification of
the financial detailing.
References
https://www.accaglobal.com, A. (2019). Preparing simple consolidated financial statements | F3
Financial Accounting | ACCA Qualification | Students | ACCA Global. Retrieved 11 October
2019, from http://www.accaglobal.com/pk/en/student/exam-support-resources/fundamentals-
exams-study-resources/f3/technical-articles/preparing-simple-consolidated-financial-
statements.html
Association of Chartered Certified Accountant (n. d.).Preparing Simple Consolidated Financial
Statements.
Australian Accounting Standard Board (2012). Consolidated Accounts viewed Retrieved 11
October 2019, from
http://www.aasb.gov.au/admin/file/content102/c3/AASB1024_5-92.pdf
Australian Accounting Standard Board (2017). Accounting for Income Tax (Tax-Effect
Accounting), Retrieved 11 October 2019, from
http://www.aasb.gov.au/admin/file/content102/c3/AASB1020_10-89.pdf
Federal Register of Legislation, AASB 127. Consolidated and Separate Financial Statements
Retrieved 11 October 2019, from https://www.legislation.gov.au/Details/F2009C01113