Holmes Institute HA2032 Corporate Accounting Assignment Report

This report analyzes corporate and financial accounting, focusing on a takeover scenario involving two ASX-listed companies, JKY Limited and FAB Limited. It examines consolidation accounting, equity accounting, and the application of AASB standards, including AASB 10 and AASB 128, to determine the most appropriate accounting methods for the acquisition. The report delves into intragroup transactions, highlighting the treatment of profits and the importance of reconciliation procedures, and addresses the impact of non-controlling interests (NCI) as per AASB 101. Furthermore, it explores the significance of financial statement disclosures, particularly concerning asset valuation, dividend payments, and return on capital, and emphasizes the role of accounting standards in providing reliable information for investor decision-making, including the impact of taxation and potential market risks. The report concludes by underscoring the importance of financial statement analysis for users and the role of AASB standards in ensuring the fair and true presentation of financial information.

Running head: CORPORATE AND FINANCIAL ACCOUNTING
Corporate and Financial Accounting
Name of the Student:
Name of the University:
Author’s Note:

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CORPORATE AND FINANCIAL ACCOUNTING
Executive Summary:
The report has dealt with two companies who are listed in ASX and has gone
through the various aspects of the financial statements of both the companies. The
report has discussed various aspects of the financial reporting which shall benefit
various stakeholders of the companies that have been discussed in this report.

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Table of Contents
Table of Contents.......................................................................................................2
Introduction...................................................................................................................3
PART A.........................................................................................................................3
Response..................................................................................................................3
Consolidated balance sheet......................................................................................5
PART B.........................................................................................................................6
PART C.........................................................................................................................9
Response..................................................................................................................9
Conclusion..................................................................................................................12
Reference List.............................................................................................................13

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Introduction
Within the companies, the accounting standards are being regarded as a
significant component. Three parts of the accounting standards are being analyzed
within this paper. The consolidated, as well as the equity accounting, are being
considered within the first part. The AASB 10 and the AASB 128 are being regarded
within this segment. The intragroup transaction of the company JKY limited is being
considered within the second part. A detailed analyzation is being performed over
the accounting standard of AASB 10 and 127. The NCI disclosure is being
considered within the third segment as per the requirement of AASB 101. The whole
section is being summarised within the task.
PART A
Response
The desire of the JKY limited is to acquire FAB limited. This is a company
which is listed in ASX. A suitable profit is present within the treasury of this company.
Choices are there for increasing the profit of the company. The guidelines of the
purchases and joint ventures are being issued by the AASB 128. These are the
guidelines which are required to be followed by the company. Two possible options
are there for attaining the FAB limited which are the method of purchase and the
acquisition where the direct purchase of the company is being implied and the
second option is about the involvement of the acquisition for attaining the company
shares (Watson, 2015). A major amount of profit is being attained by the company
over both the options considering the acquisitions. A special case of the
consolidation as well as equity accounting as per the consequences which are
discussed in the chart:

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CORPORATE AND FINANCIAL ACCOUNTING
Consolidation accounting Equity accounting
The process through which the financial
outcomes of the entire subsidiaries are
being regarded is known as
consolidation accounting. The financial
statement of the parent company is
being regarded in this (Qiu, Shaukat,
and Tharyan, 2016).
The investment is being treated as an
asset within this accounting process
within the associate company. When
about 20% to 50% of the share of a
company is held, then this is performed
(Qian, Gao, and Tsang, 2015).
Within the subsidiary company occurs
the emerging of the financial items of
the company.
The associates never merge the entire
financial items. The investment of the
company is only utilized which is being
presented within the company’s balance
sheet.
A 50% share is being held by the
subsidiary company along with the
parent company which is performed
under the subsidiary company (Pratt,
2016).
While a share of more than 20% is held
by the subsidiary company under the
associate.
The acquisition method has held a
complete consolidation
The full acquisition is not being allowed
under this method as this is under
equity method while the investment
segment of the parent company is
involved along with the associate
company (Maas, Schaltegger and
Crutzen, 2016).

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The company JTY limited should use the consolidation method as the best
method of accounting. This is the method which includes the acquisition or purchase
method. The company is being assisted with it for focusing on the numerous aspects
of financial reporting. The financial statement of the subsidiary is being consolidated
by this. Possible chances are there for increasing the company’s goodwill with profit.
This assists in gaining people’s trust. The company is being assisted with the true
and fair reporting in the long run. The benefits of the acquisition method are taken by
the firm which is the best practice which assists in the proper financial reporting
(Lins, Servaes and Tamayo, 2017). This has happened due to the attachment of the
parent company with the subsidiary company considering the financial statements.
Thus, the company can repose the entire financial transactions. The best practice of
the firms is under this. The benefits of the acquisition and the post-acquisition
process are regarded by the JTY limited the company is being assisted for creating
the best from the selected practice (Kothari, 2019). Thus, there is a successful
purchase acquisition method for business.
The entire disclosure of the financial statement regarding the parent company
is processed under the consolidating accounting along with the subsidiary company.
Consolidated balance sheet
Particulars July ltd FAB ltd
Assets 307000 147000
Liabilities -262000 -125000
Total equities and -307000 -147000

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liability
The entire terms of the balance sheet are structured under a similar balance
sheet is observed. This assists in the management of the financial statements of
both the companies. The practice has a major effect which is assisted in the fair and
true reporting of the financial statements after the acquisition as well.
PART B
The intragroup transactions are the consolidated transactions. This is the
company where some of the investments are made by the subsidiary company and
some goods are sold where profit is made for the given period (Koh et al. 2015). The
parent company is made to earn a profit. The treatment of the profit is being
regarded as a major question within the financial statement of the company. A huge
effect is being processed over the transaction of the company. The profit treatment is
the major segment within the financial statement. The parent company has earned
some profit which is being treated as income from the subsidiary company. While the
asset that is being vented by the subsidiary company is being regarded as the sales
within the subsidiary company’s accounts. Under the NCI, there lies a major effect
regarding this practice. This is the thing which is being regarded as the major
significant segment during treating profit and loss of the company. The intragroup
transactions have provided certain rules which are being incorporated during the
final reconciliation. Within the context of numerous requirements, this is being
performed:
 Discrepancies are cut-off: Within the dates of the cut-offs, there lie some
discrepancies. Thus, the employment of this process is necessary during the

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CORPORATE AND FINANCIAL ACCOUNTING
reconciliation process. The companies are being assisted during the
mitigation of the discrepancies within the procedures of accounting regarding
the commonalities (Khan, Serafeim and Yoon, 2016).
 The close dates are modified: The close dates have some modifications
within the subsidiary company and the parent company. Thus, the activation
of the reconciliation process is essential. The numerous aspects of the
modifications are being focused by the company considering the accounting
method of both the companies. The big accounting discrepancies are made
responsible regarding the close dates. Like, when the parent company is
closing the account book commendably on each year 31st December. Then
the accounts book of the subsidiary company is closed over the half-yearly
basis. The numerous aspects are being focused through the firefights where
the disclosure date is considered.
 Foreign companies’ dominance: The foreign recurrence is responsible for
dominating the transactions that are being processed by the companies within
each other. Thus, the several aspects of the foreign market are being focused
which is significant for the companies. These are both companies which are
being run within similar industries. Thus, it is not being regarded as a major
issue during making some identification of accounting guidelines and
principles that are being demanded the companies (Honggowati et al. 2017).
These are the practice which bears a constant effect and thus, is being
proceeded towards the long run. Thus, to assist the company during the
process of management has become important with the formulation of proper
regulations and rules.
 Other reasons for assessment

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Non-Controlling Interest
parent company
$
subsidiary company $
revenues 812000 250000
expenses 354000 188000
Excess fair value
amortization
()50 32000
net income 458000 30000
ownership stake 85% 15%
controlling interest 25500
Non-controlling interest 4500
The company is being assisted with this during analyzation as well as each
transaction within the financial statement due to this specific effect. The calculation
of the non-controlling interest is being reflected in the table which is mentioned
above. 4500 is the estimation of the non-controlling interest. The ownership stake is
responsible for assessing this which is about 30000. 15% is the calculated interest
that lies within the segment of the non-controlling interest. A profit assessment is
being processed considering the company. A simple classification is made over the
assets as well as for the incomes of the companies. Both the kinds of companies are
being included that is the parent company and the subsidiary company. The

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translation has some special effect on the company’s financial statements. The
accurate intercede is being measured that is to be uncontrolled (Duff, 2016).
PART C
Response
The financial statement of the company has provided some information which
is being confined with the proper allocation of the company’s resources. This is
observed that the retained earnings of the company are invested within the
appropriate business plans. Investments are included within these plans that are
resource free. The company has less dependency on the debt fund. Decisions are
being processed by the investors based over the company’s past, the present and
the future events that are being disclosed within the financial statements. The
reflection of the fair and true images over the financial statement which is being
regarded as a basic need. The introduction of the company’s fair value assets is also
being regarded within it within the balance sheet of the company. There are the
resources which are being allocated over the subsidiaries that are available, where
the company is being considered. This is the matter that is being disclosed within the
report of the independent auditor as per his statement (Crowther, 2018). Statutory
compliance has regarded the entire information about the company.
Proper decisions are being taken by the investors that are being based on the
reliability and the relevance of the financial statement. In this context lies the positive
attitude of the investors. The securities or the investors have regarded this, as the
significant decision that is constructed by the company is based over the disclosure.
The security market is being assisted with the information, for instance, the taxation
risk that is being discussed in the financial report of the company for taking suitable
decisions over the terms of investment. A reduction is being noticed in the profit after

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the tax as the company is being permitted for paying more tax. A drop in the net
income of the company is also noticed. Thus, investors have also reacted. This has
specified about the termination of the investments within the company until a profit is
made within a company (Caskey and Laux, 2016). In this segment there lies a
chance where the company can lose the market grip. Thus, the users are required to
analyze the financial statements. The accounting standard AASB 10 has suggested
this. The AASB has made this compulsory where IFRS is being issued by this across
the world. The business should adopt the accounting standard for presenting the
financial statement in a suitable way. AASB is being utilized within this accounting
purpose regarding the implementing of the guidelines considering the presentation,
the structure and the financial statement content that the company has prepared.
Some reasons are there which has made discloses important which are:
 The true value of the assets is viewed.
 The dividend payment is assisted as when the value of an asset is increased,
then the company attracts more investors. Chances are lying for getting more
of the dividends from the company.
 The true return rate is shown regarding the employment of capital.
 Fair and true value is there within the financial assets of the company.
 The company is being assisted with it during taking loans from banks which
specifies about the increased value of the assets for keeping suitable
mortgage along with the ban. Chances are lying where companies can
receive the desired return rate.
After the revaluation of the assets, the true amount of the assets can be
attained.

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The true, as well as the fair image of the asset, is visible after the revaluation
of the asset. The accounting system requires some SAC2 statement regarding the
accounting concept for general purpose. This is being utilized for dealing with the
objectives of the general purpose of financial reporting. This is a significant
disclosure as decision are being taken by the company’s stakeholders and investors
regarding that disclosure. The directors of the company have also used it for the
construction of proper business plans and policies. The company’s resources are
also properly allocated due to this. Certain qualitative characteristics are also
present, where the business could rely on. All these are being regarded as the base
of the financial statement.
The profits are required to be added within the financial statement which is
comprehensive. Within every fund of the owners, the profits are being added by the
company as a major percentage of the subsidiary company is held by this. While the
NCI is not shown when a percentage of less than 50% is being owned by the
shareholder. Ownership right is also not present there, thus, not voting rights are
also there in the aspects of the shareholders. The NCI is not seen to be reporting as
an owner equity fund, when, less than 50% of shares are held by the company. A
consolidated account is there for the companies where the NCI reports about the
financial statements which are essential for the company to stay focused over the
financial statements (Balakrishnan, Watts, and Zuo, 2016).
The reliability of the financial statement is important. The rendering of the
information considering the financial statement is being referred by the quality of the
financial statements that are impacted by any biases or errors. This becomes
possible when faithful information is served regarding the financial statement. The
reader relies on the information (Armstrong et al. 2015). The stakeholders read the

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events and the transactions which the company has presented. A decision is being
taken by them over the server information. This is sometimes not understandable. All
this has specified about that, the stakeholders sometimes do not understand the
economic terms which is not necessary. Thus, it is required that the information is
served in an easy language.
Conclusion
This is to be concluded that, within the financial statement, there is a
requirement of a significant disclosure. Numerous aspects of financial reporting are
being focused on where the company is benefitted. The financial statement of the
company can attract the securities market, the investors and the further businesses.
The NCI has affected the financial statement especially. The owners’ equity is shown
by the companies which hold a minimum of 50% share within the subsidiary
company. Despite this condition, the company is not helped to visualizing their equity
and the voting rights of the company.

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Reference List
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for Standard Setting. The Accounting Review, 94(2), pp.357-361.

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