Corporate Accounting and Reporting: Acquisition Analysis and Journals

This report provides a detailed analysis of corporate accounting principles, specifically focusing on the consolidation of financial statements. It begins with an acquisition analysis, examining the acquisition of Possum Ltd by Leadbeaters Ltd. The report then delves into consolidation journals, detailing the necessary adjustments for intra-group transactions, such as retained earnings, inventory, and deferred tax assets. The rationale behind these adjustments is explained, emphasizing the elimination of internal profits and the accurate representation of transactions with external parties. The report includes worksheet entries and concludes with consolidated financial statements, demonstrating the combined financial position of the two companies. References to relevant accounting literature are also provided to support the analysis. The assignment covers key aspects of corporate accounting, including acquisition analysis, consolidation journals, intra-group transactions, and the preparation of consolidated financial statements. This report is contributed by a student and available on Desklib, a platform for students to access AI-based study tools.

Running head: CORPORATE ACCOUNTING AND REPORTING
Corporate Accounting and Reporting
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1CORPORATE ACCOUNTING AND REPORTING
Table of Contents
Acquisition analysis:........................................................................................................................2
Consolidation journals:....................................................................................................................3
Worksheet entries:...........................................................................................................................4
Rationale of intra-group transactions:.............................................................................................4
Consolidated financial statements:..................................................................................................6
References:......................................................................................................................................8

2CORPORATE ACCOUNTING AND REPORTING
Acquisition analysis:

3CORPORATE ACCOUNTING AND REPORTING
Consolidation journals:

4CORPORATE ACCOUNTING AND REPORTING
Worksheet entries:
Rationale of intra-group transactions:
The adjustments are required to be made to the intra-group transactions, since these are
internal to the business organisation and they do not represent the impact of transactions with
external parties (Beuselinck and Deloof 2014). In this case, the following intra-group
transactions are made:
Retained earnings:
This transaction is for the previous period, in which Possum Limited tax before profit of
$750 or profit after tax of $525 on sale of inventory, which is within the group. As the sale is
made by not considering the outside entities, it is necessary to eliminate profit on consolidation.

5CORPORATE ACCOUNTING AND REPORTING
Any gain on selling inventory sold to the outside parties does not need any consolidated
adjustment since the gains on sale are recognised by the group.
Inventory:
At 30th June 2017, Leadbeaters Limited has inventory in hand still from the intra-group
transactions in the previous period and they are recorded at cost including an unrecognised profit
of $750. The inventory cost to the group is $750 lower in comparison to the amount recorded by
the organisation, which has resulted in minimisation of inventory by $750.
Deferred tax asset or income tax expense:
When there is any variation in the carrying value of inventory, it leads to a temporary
difference between the tax base related to the asset and its carrying amount. Due to the
minimisation in the carrying value, it results in the creation of a deferred tax asset (Haier,
Molchanov and Schmutz 2016).

6CORPORATE ACCOUNTING AND REPORTING
Consolidated financial statements:

7CORPORATE ACCOUNTING AND REPORTING

8CORPORATE ACCOUNTING AND REPORTING
References:
Beuselinck, C. and Deloof, M., 2014. Earnings management in business groups: Tax incentives
or expropriation concealment?. The International Journal of Accounting, 49(1), pp.27-52.
Haier, A., Molchanov, I. and Schmutz, M., 2016. Intragroup transfers, intragroup diversification
and their risk assessment. Annals of finance, 12(3-4), pp.363-392.