Analysis of Consolidated Financial Statements for Griffin Ltd

This report provides a comprehensive analysis of the consolidated financial statements of Griffin Ltd. The assignment focuses on the preparation and interpretation of these statements, including the income statement, statement of financial position, and statement of changes in equity. The rep...Read More

Corporate Accounting and
Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Preparation of consolidated financial statements in the books of Griffin Ltd. ...........................1
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Corporate accounting and reporting is a process that includes preparation of summary of
the accounting and financial transactions of the company for the purpose of determining total
amount of profit generated by the company by performing several business activities and
several[ investments made by the business during a specific time period. Griffin Ltd. Is a
company that operated its business for manufacturing and selling the women's clothing.
Company has acquired 100% shares of Frank Ltd. For $330000. The present assignment shows
preparation of consolidated financial statements of Griffin Ltd.
MAIN BODY
Preparation of consolidated financial statements in the books of Griffin Ltd.
Consolidated financial statements
The consolidated financial statement refers to a set of statements including income
statement, statements showing financial positions, statements showing change in equity of both
holding and its subsidiary companies (deloitte-au-audit-australian-financial-reporting-guide-
december-2017-160181.pdf, 2019). It is prepared by summarizing all the financial transactions
of both holding and subsidiary company.
Acquisition adjustment
Particulars Amount Amount
Fair value of shares acquired 330000
Less: Value of cum dividend 10000
Net fair value of acquisition 320000
Less: Value of identifiable assets
Share capital 200000
General reserve 20000
Retained earnings 50000 270000
50000
Add: Adjustment value of plan 6000
Adjustment for land 20000
Adjustment for inventory 8000
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Adjustment for brand value 12000
Less: Adjustment for increase in liability -10000
36000
Less: Tax (30%) 10800
25200
Net value of acquisition 295200
Value of goodwill 24800
consolidation entries in the books of Griffin Ltd. As on 30 June 2019
Date Particulars Amount Amount
1 Depreciation expenses account (plant) dr. 600
Retained earnings account dr. 1680
Loss on sale of plant account dr. 3000
To income tax expenses account 1080
To business combination valuation reserve 4200
(being plant and retained earning adusted)
2 Brands account dr. 12000
To deferred tax account 3600
To business combination valuation reserve 8400
(being adjustment done for brands)
3 Business combination valuation reserve dr. 7000
Income tax expenses account dr. 3000
To profit from guarantee 7500
To guarantee expenses account 2500
adjustments for pre acquisition in the books of Griffin Ltd.
Particular Amount (at Amount (as on 30
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acquisition) June 2019)
Plan (186000 – 180000) 6000 6000
Inventories (28000 - 20000) 8000 0
Land (210000-190000) 20000 0
Brands 12000 12000
Liability in context to guarantee -10000 -10000
Net assets 36000 8000
Less: tax (30%) 10800 2400
Net business combination value reserve 25200 5600
pre acquisition entries as on 30 june 2016 in the books of Griffin Ltd.
Date Particulars Amount Amount
1 Retained earnings account dr. 50000
General reserve account dr 20000
Share capital account dr 200000
Business combination value reserve account dr 25200
Goodwill account dr. 24800
To frank ltd. Account 320000
(being pre acquisition adjustments made)
pre acquisition entries as on 30 june 2019 in the books of Griffin Ltd.
Date Particulars Amount Amount
1 Retained earnings account dr. (1) 56600
Goodwill account dr. 24800
General reserve account dr 33000
Business combination value reserve account dr 5600
Share capital account dr 200000
To frank ltd. Account 320000
(being pre acquisition adjustments made)
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working note
calculation of amount of retained earning as on 30 June 2019
Particular Amount
Retained earning 50000
Value of acquiring land 14000
Value of acquiring inventory 5600
Amount to be transferred to general reserve 13000
Net value of retained earnings as on 30 june 2019 56600
consolidated income statement of Griffin Ltd As on 30 June 2019
Particular Griffin ltd Frank ltd. Adjustment
Consolidated
amount
Sales 190000 110000 7500 307500
Less: Expenses 80000 76000 -1900 154100
153400
Add:
Income from sale of
fixed assets 5000 4000 -3000 6000
Profit before interest
and taxes 115000 38000 0 159400
Income tax paid 40000 6000 1920 47920
Pat 111480
Add:
Profit from revaluation
of assets 12000
Net consolidated income 123480
consolidated statement of showing change in equity Griffin Ltd As on 30 June 2019
Particular Griffin ltd Frank ltd. Adjustment Consolidated
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amount
Net income for the year
ending 2019 123480
Add
: Retained earnings 109720
Profit after tax 111480
Les
s: Dividend paid 34000 0 -34000
Retained earnings for
the year 2017 187200
Share capital as on 1 july
2017 280000 200000 -200000 280000
Share capital as on 30 june
2018 280000
General reserve as on
1july 2017 20000 48000 48000 20000
General reserve as on 30
june 2018 20000
Profit from revaluation of
assets for the year 1 july
2017 12000 0 0 12000
Profits 12000 0 0 12000
Total profit from
revaluation of assets 24000
consolidated statement of financial position of Griffin Ltd As on 30 June 2019
Particular Griffin Frank Adjustm Consolid
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ltd ltd. ent
ated
amount
Current assets
Cash 12000 30000 42000
Debtors 28000 12000 40000
Inventories 30000 51000 81000
Total current assets 163000
Non current assets
Plant 230000 320000 550000
Accumulated depreciation amount -120000 -40000 -160000
Goodwill 0 0 24800 24800
Brands 0 0 12000 12000
Total non current assets 426800
Total assets 589800
Current liabilities
Share capital 280000 200000 -200000 280000
Reserve and surplus
General reserve 20000 48000 48000 20000
Profit from revaluation of assets 12000 0 12000 24000
Retained earnings 121000 105000 187200
Net equity 511200
Creditors 40000 8000 0 48000
Provisions for bad and doubtful debts 15000 12000 0 27000
Total. Current liabilities 586200
Non current liabilities
Deferred tax 0 0 3600 3600
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Total non current liabilities 3600
Total liabilities 589800
Interpretation
From the analysis of the above consolidates financial statements and other consolidated
calculations, it can be interpret that the consolidated income statements shows a sum total of
earnings generated by both holding and subsidiary companies (Yonelinas and Ritchey, 2015) .
As per the Australian accounting standards, at the time of preparing consolidated financial
statements, the holding company needs to include each incomes, expenses, profits and losses
equivalent to the amount of shares held by the holding company in the subsidiary.
In the present case, the Griffin Ltd. Has acquired 100% of share in the Frank Ltd. Thus,
while preparing various statements showing financial transactions of the company overall
incomes, expenses, profits and losses has been consolidated in the books of Griffin Ltd.
By analysing the consolidated income statement of the Griffin Ltd. It can be interpret that
the consolidated net income of Griffin Ltd. And Frank Ltd. After adjusting all the operating and
non operating incomes and expenses of both the companies is arrived $123480.
on the other hand, by analysing the consolidated statements of financial position, it can be
interpret that the after consolidating assets and liabilities of both the companies, the liquidity
position of Griffin Ltd. Is good as it has maintained sufficient amount of assets for the purpose of
paying the debts.
Analysis
By analysing the consolidated income statement of Griffin Ltd. And Frank Ltd. In the
books of Griffin Ltd. It can be evaluated that while preparing the consolidated financial
statements of the company, all the adjustments made during the year regarding such income or
expenses is needed to be adjusted before including them in the consolidated books of accounts.
Further, all the adjustments done in the value of assets or liabilities of the subsidiary company,
are transferred in the business combination value reserve account (Ricker and Sandry, 2018) . In
addition, amount of deferred tax and incomes generated by the businesses are also transferred in
the business combination value reserve account.
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Talking about retained earnings, the amount of retained earnings shows the part of profit
which has not been used for the distribution of dividend to the share holders. Rather, the amount
has been kept by the company for using it in the for the purpose of further running business or
for the expansion purpose. (Ackermann and et.al., 2015). At the time of preparing income
statements for the consolidation purpose, amount of retained earnings are to be adjusted each
year in order to determine the actual retained earning with the business.
Assumptions:
While preparing consolidated financial statements in the books of Griffin Ltd. It has been
assumed that company has not purchased any new assets between 2016 to 2019. both the
companies have also not generated any further deferred tax liability during the period (Xu, Wu
and Makary, 2015).
In addition, it has also been assumed that no amount of dividend has been paid by Frank
Ltd. During 2016 to 2019. moreover, the last assumption has been taken that Griffin Ltd.
Transfers to Business combination value reserve account each year.
CONCLUSION
From the analysis of above assignment, consolidated financial statements shows
combination of all the assets and liabilities held by the both holding and subsidiary companies. it
can be concluded that the Griffin Ltd. Has acquired 100% shares of Frank Ltd. Thus,
consolidated income statements in the books of Griffin Ltd. Has been prepared by adding 100%
incomes, expenses,profits and losses generated by Frank Ltd.
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