Corporate Accounting and Reporting: Consolidation Report

This report provides a detailed analysis of corporate accounting principles, specifically focusing on the computation of goodwill and the preparation of a consolidated balance sheet. The assignment involves calculating goodwill based on the fair value of net identifiable assets (FVINA) and the investment in shares. It includes a comprehensive worksheet entry demonstrating the consolidation process, adjustments for intercompany transactions, and the application of relevant accounting standards. The report also presents a consolidated balance sheet, reflecting the combined financial position of the parent and subsidiary company. Key assumptions, such as the treatment of dividend receivables and deferred tax liabilities, are clearly stated. The report concludes with a bibliography of relevant accounting literature, providing a strong foundation for the analysis and demonstrating a thorough understanding of the subject matter. This report is valuable for students studying corporate accounting as it provides a practical application of complex accounting concepts.

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

1CORPORATE ACCOUNTING AND REPORTING
Table of Contents
Computation of Goodwill:.........................................................................................................2
Consolidated balance sheet as on 1 July 2017:..........................................................................3
Worksheet Entry:.......................................................................................................................4
Assumptions:..............................................................................................................................4
Bibliography:..............................................................................................................................5

2CORPORATE ACCOUNTING AND REPORTING
Computation of Goodwill:
Pre-acquisition Equity
Carryin
g
amount
Fair
Value
Fair Value
adjustmen
t
Calculation
s
Net Fair
Value
Share Capital $90,000
Retained Earning $36,000
General Reserve $12,000
(+) Plant and
Equipment $35,000
$43,00
0 $8,000 8000*0.7= $5,600
(+)Inventories $42,000
$46,00
0 $4,000 4000*0.7= $2,800
(+)Research and
Development 12000*0.7= $8,400
(-)Contingent Liability 3000*0.7= $2,100
FVINA $152,700
Goodwill = Investment in shares of Finn Ltd – Fair value of net identifiable assets.
= 153800 – 152700 = $1,100

3CORPORATE ACCOUNTING AND REPORTING
Consolidated balance sheet as on 1 July 2017:
Erik Ltd
Consolidated Balance Sheet as on 1 July 2017
Current Assets:
Cash $ 31,600
Receivables $ 32,600
Inventories $ 101,000
Other Assets $ 30,000
Total Current Assets $ 195,200
Non Current Assets:
Goodwill $ 1,100
Plant and equipment $ 325,000
Accumulated Depreciation $(107,000)
Total noncurrent assets $ 219,100
Total Assets $ 414,300
Current Liabilities:
Dividend payable $ 25,000
Other Liabilities $ 103,000
Deferred tax liability $ 6,300
Total current liability $ 134,300
Noncurrent liability $ -
Total Liabilities $ 134,300
Equity:
Share capital $ 130,000
General Reserve $ 56,500
Retained Earnings $ 93,500
Total Equity $ 280,000
Total of liabilities and equities $ 414,300

4CORPORATE ACCOUNTING AND REPORTING
Worksheet Entry:
Erik Finn Adjustments Group
Ltd Ltd Dr Cr
Cash $ 11,000 $ 20,600 $ 31,600
Receivables $ 25,200 $ 20,000 $ 12,600 $ 32,600
Other assets $ 10,000 $ 8,000 $ 12,000 $ 30,000
Inventory $ 55,000 $ 42,000 $ 4,000 $ 101,000
Shares in Finn Ltd $ 153,800 $ - $ 153,800 $ -
Plant $ 210,000 $ 107,000 $ 8,000 $ 325,000
Accumulated
depreciation
$
(85,000)
$
(22,000)
$
(107,000)
Goodwill $ 1,100 $ 1,100
Total Assets $ 380,000 $ 175,600 $ 414,300
Dividend payable $ 25,000 $ 12,600 $ 12,600 $ 25,000
Other liabilities $ 75,000 $ 25,000 $ 9,300 $ 109,300
Share capital $ 130,000 $ 90,000 $ 90,000 $ 130,000
Retained earnings $ 93,500 $ 36,000 $ 36,000 $ 93,500
General reserve $ 56,500 $ 12,000 $ 12,000 $ 56,500
Business
combination
valuation reserve
$ - $ - $ 15,800 $ 15,800 $ -
Total Liabilities $ 380,000 $ 175,600 $ 414,300
Assumptions:
1. It is assumed that the dividend receivables in the books of Erik Ltd are included in the
accounts receivables. The elimination entry for intercompany dividend receivables
has been given to the accounts receivables.
2. Contingent liability has been included in the other liability and the acquisition entry
has been given accordingly.
3. Deferred tax liability on fair value adjustments and subsequent adjustment entries,
have been included in the other liabilities in the consolidation worksheet entry.

5CORPORATE ACCOUNTING AND REPORTING
Bibliography:
AASB, C.A.S., 2016. Consolidated Financial Statements.
Biaek-Jaworska, A. and Matusiewicz, A., 2015. Determinants of the level of information
disclosure in financial statements prepared in accordance with IFRS. Accounting and
Management Information Systems, 14(3), p.453.
Hadi, K.T., 2015. Consolidated financial statements.
Schaltegger, S., Etxeberria, I.Á. and Ortas, E., 2017. Innovating corporate accounting and
reporting for sustainability–attributes and challenges. Sustainable Development, 25(2),
pp.113-122.