HA2032 Corporate Takeover Decision Making & Consolidation Accounting

This report assesses the importance of financial reporting for organizations, using JKY Ltd. as a case study for purchase acquisition methods. It highlights the necessity of fair and accurate financial reporting and the role of Non-Controlling Interest (NCI), while emphasizing compliance with financial regulations. The analysis covers equity and consolidation accounting theories, intra-group transactions within JKY Ltd., and NCI disclosures as per AASB 101. The report advocates for the consolidation method of accounting for JKY Ltd., emphasizing its benefits in financial reporting and goodwill enhancement. It also examines the impact of intra-group transactions on financial statements, the significance of reconciliation processes, and the calculation of non-controlling interests. Ultimately, the report underscores the need for transparent financial statements that reflect true asset values and inform investor decisions, while adhering to statutory compliance.

Name of the Student
Name of the University
Author Note

Executive Summary
The report suggests the reporting of finance should be made essential criteria for all
the organizations. The suggestion can be put down to JKY Ltd for the method of the
purchase acquisition, which will help the company to provide analysis on the report.
Besides this, it is very important to note that the organization must portray very fair
and true value in its reporting of finance. NCI is considered to be the very vital tool of
the organization but it does not hold any voting rights in and for the organization. The
compliance has been made by the body of statures of the department of finance and
which is why it is relevant for the organization to create a lucid report on the grounds
of the assessment of finance.

Table of Contents
Executive Summary......................................................................................................1
Introduction...................................................................................................................3
Part A response............................................................................................................3
Part B response............................................................................................................5
Part C response............................................................................................................6
Conclusion....................................................................................................................8
Reference:....................................................................................................................8

Introduction
The standards of accounting are also important tools for the organization. The
standards produce regulations and rules so as to report the competencies during a
single period. The paper will basically follow 3 units to be considered into the
analysis of this report. The first part of the report will deal with the equity and
consolidated accounting theory where the discussion on AASB 10 and AASB 128
will be discussed in this section. The second section of the report will deal with
transactions within the intragroup of the organization, JKY Ltd. where the discussion
on AASB 10 and AASB 10 will be discussed in this section (Walton, Haller and
Raffournier 2003). The third section of the report will deal with the disclosure of the
NCI i.e. needed in accordance with the AASB 101. Finally, the summary of the whole
report will be provided which will help in summarizing every section in detail.
Part A response
The ASX listed company named FAB Ltd. would be acquired by JKY Ltd. Hence it
can be expected that this organization has a lump sum amount of money or rather
profit in its cash treasure. The special effects could be maintained on the acquisition
of the company which will lead to an increase in the profit-making of the
organization. The AASB 128 is responsible to issue guidelines in the joint ventures
and acquisition. It is expected that the organization must follow the guidelines as is
issued. Both of the options are available for the organization to acquire FAB ltd. On
one hand, there is the method of acquisition and purchase of the company which
could imply the direct purchase of the organization and on the other hand, there
remains the acquisition of the shares of the organization (Chua, Cheong and Gould
2012). According to both of the options, the organization is provided with a huge
amount of profit in terms of the method of acquisition and purchase. As a result, it
will serve as an exclusive case of the accounting process of equity and
consolidation. This has been provided in details below:
Equity Accounting Consolidation Accounting
Equity accounting is the accounting
process where it holds considering the
assets as an investment in the
organization which is associated. It is
practiced when an organization holds at
least twenty percent to fifty percent of
share in an organization.
Consolidation accounting is the
accounting process where the
amalgamation of the results of the
finance with all other subsidiaries is
considered. The combination of all the
statement of finance of the parent
organization is considered.
More than twenty percent of the share in
the subsidiary organization is associated.
There is a fifty percent share of the
subsidiary company related to the parent
organization.
The items of finance are not associated
fully with the associate company. The
company only uses the organizational
investment, which has been already
listed in the balance sheet of the parent
organization.
The items of finance are associated with
the subsidiary organization.

The process is based on full equity that
does not allow on the basis of the full
acquisition instead of the part of the
investment of the parent organization in
the associated organization.
There is a total consolidation in the
method of acquisition.
Table 1: Equity accounting and Consolidation accounting
It will be proper and the best method if JTY Ltd. chooses the consolidation method of
accounting which the method of acquisition and purchase. Thus, it will help the
company to highlight the different aspects of the reporting of finance. It would also
assist in the consolidation of the company determining the statement of finance of
the subsidiary organization. It can be noted that there are relevant opportunities in
the increment of the goodwill and trust of the organization, which would help in
gaining the profit while attaining the trust from the people inside as well as outside
the organization (Alfredson et al., 2005). The best practice of the organization is to
achieve the benefits of the methods of acquisitions, due to the fact that the statement
of finance of the subsidiary organization is linked with the parent organization. The
best practice could be performed by reposting the common financial transaction of
the company. There would be a benefit for JTY Ltd. to avail the benefits of the
method of post-acquisition and acquisition. Hence, it can be said that the method of
purchase acquisition tends to be successful for the organization.
According to the consolidated method of accounting, there is a total disclosure of the
statement of finance of the parent organization on the basis of the subsidiary
organization.
Particulars JTY Ltd. FAB Ltd.
Assets 307000 147000
Liabilities -262000 -125000
Total Liabilities and
Equities
-307000 -147000
Table 2: Consolidated Balance Sheet
It is totally evident that the total terms under the balance sheet are listed on the
same balance sheet, which propounds the huge impact on the process of practice.
This will help the organization in managing the statement of finance for two of the
organizations. The huge effect of the practice will assist in finding the fair and true
value of reporting of the statement of finance of the mutual post acquisition of the
organization.

Part B response
The consolidated transactions are also intragroup transactions and vice versa.
According to this case, the subsidiary organization has performed some expense
and has sold few goods resulting in the creation of the profit with the provided period
of time. It has created a profit-making turn for the parent organization. The question
arises here regarding the treatment and usage of the profits in the statement of
finance of the organization. Hitherto, it can be considered that there is a huge impact
which has been created on the organizational transaction. The huge section is the
usage of profit in the statement of finance. The profit that is gained by the parent
organization will be seen as the income form the subsidiary organization. Apart from
this, the assets that are sold by the subsidiary organization will be considered as the
sales in the account of the subsidiary organization. Under the NCI there is a huge
effect on its practices. This is considered to be one of the most important sections
invalidating the profit and loss of the organization (Schührer 2018). Transaction
within the intragroup provides specific rules and regulation for the organization. The
rules that are given by the intragroup transaction are to be implemented and
incorporate during the period of eventual reconciliation. The process of reconciliation
is implemented throughout the process of the final reconciliation. The performance of
this reconciliation is provided in the following needs of the following contexts:
 Cutting of the discrepancies with the date – Discrepancies are provided with
the cut-off dates where it is important to employ the process of reconciliation.
This will help the company to mitigate and to curtain the level of hindrances or
discrepancies in the process of accounting if it is pursued as of common.
 Changes in the closing dates – Changes are present in the closing dates of
the parent organization as well as in the subsidiary organization. Hence, it is
important to create an active process of reconciliation (Picker et al., 2016).
This will assist the organization to thrive on various changing aspects which
could be responsible to create big hindrances or discrepancies towards the
accounting procedure. For instance, the parent organization would close its
account books on the 31st Dec in every year. On the other hand, the
subsidiary organization will close its account books on a half-yearly basis. It is
important to have a firefight in the organization to move into various aspects
of disclosing the dates.
 Domination of the foreign organization – It is possible that the financial
transactions that are created among each other by the organization are
dominated by the recurrence of the foreign organization. Hence, it is vital for
the organization to thrive in various aspects of the international markets. It
would not be difficult to understand and to identify the principles and
guidelines of accounting as both of the organizations are in the same
industrial platform. Constant effects have been created on the purpose of the
organization and it will continue in the long run too (Picker et al., 2016).
Hence, it is considered to be vital in assisting the organization in the process
of management through the issuance of legitimate standards and policies.
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
Table 3: Non-controlling interest
It has assisted the organization to thrive on the interest of the ownership of all the
organizations. This has helped the organization to analyze the significant effect on
each of the transaction as recorded in the statement of finance. As per the above, it
depicts the calculation of the interest those are non-controlling in nature. The interest
that is non-controlling in nature has been estimated as 4500 that has been assessed
as per the basis of the stake of the ownership which was amounted to 3000. The
interest in the non-controlling asset has been calculated as fifteen percent which has
been provided with the assessment of the profit-making business of the organization
those are very much easier (Schührer 2018). The classification as provided in the
assets and incomes of the organization is very much easier to calculate. The
organization includes two of the kinds of the organizational bodies those include both
of the subsidiary as well as the parent organization. A special effect on the
translation of the statement of the finance is included in the organization assisting in
interceding of the accuracy that is non-controlling.
Part C response
The data that has been given in the statement of finance of the company is limited to
the proper and efficient allocation of the materials and resources of the organization.
It is evidential that the organization has made its expenses on the returning earnings
in the efficient plans of the business. The plans include the expenses that are spent
on the resources that are risk-free. The organization does not have to rely on the
debt fund of it. The investors are also overwhelmed by the disclosure of the financial
statements as provided by the organization. This will help the investors to create
decisions which are completely based on the events of past, present, and future of
the company that is provided in the statements of finance (Benson et al., 2015).
There is a preliminary need for the reflection of the fair and true value of the financial
statements of the organization which includes the introduction of the authentic values
of the assets in the balance sheet of the organization. The resources allocation is
provided on the grounds of the subsidiaries that are available for the organization.
The auditors those who are independent also disclose the matters that are relevant
to the statements. The inclusions of all the materials are to be recorded under the
compliance of the statutory organization.
The proper and viable decisions are to be maintained on the basis of the importance
of the statements of finance. Positive attitudes will be presented by the investors
according to this context of availability as it is hugely in need by the investors or by

the stakeholder due to the fact that their vital decisions are to be made after the
company discloses its financial statement (Benson et al., 2015). The data like the
risk of taxation is to be presented by the organization in its report of finance which
would help the stock market to identify, understand and to make legitimate decisions
on the terms of investments and expenditures. This is important as when the
organization is getting the benefit of allowing incurring more tax the profit after their
taxation would gradually reduce. It would result in the falling of the net income of the
organization and on that the investors and stakeholders of the company will
accordingly give their reactions. Hence, the organization is going to cease its
operation of the business as there are huge chances of the organization to lose the
grip of the market. Hence, it is relevant to analyze the statements of finance by the
users. This is thereby suggested on the basis of the standard of accounting that is,
AS 10 (Barth et al., 2008). Therefore, it had been made compulsory by the Australian
Accounting Standard Board that provides IFRS all across the globe. The standards
of accounting are accepted throughout the globe by the organizations, companies or
business so as to present their statement of finance in a viable manner. The purpose
of the AASB is that it is responsible for the issuance of the guidelines that are in
regard to the structure, content, and presentation of the statements of finance as
conducted by the organizations.
The correct and feasible choices are to be kept up based on the significance of the
announcements of fund. Uplifting mentalities will be displayed by the speculators as
indicated by this setting of accessibility as it is immensely deprived by the
speculators or by the partner because of the way that their indispensable choices are
to be made after the organization uncovers its budget summary (Benson et al.,
2015). The information like the danger of tax assessment is to be exhibited by the
organization in its report of account which would assist the securities exchange with
identifying, comprehend and to settle on authentic choices on the terms of
speculations and uses. It would result in the falling of the net gain of the organization
and on that the speculators and partners of the organization will give their
responses. Henceforth, it is applicable to break down the reporting of account by the
clients. This is along these lines proposed based on the standard of bookkeeping
that is, AS 10 (Barth et al., 2008). In this manner, it had been made obligatory by the
Australian Accounting Standard Board that gives IFRS the whole way across the
globe. The measures of bookkeeping are acknowledged all through the globe by the
associations, organizations or business to display their announcement of fund in a
reasonable way. The reason for the AASB is that it is in charge of the issuance of the
rules that are concerning the structure, substance, and introduction of the
announcements of fund as led by the organization.
The following reasons are provided to provide the effect of the disclosure of the
financial statement by the organizations:
 This will assist in portraying of the true and fair value of the assets of the
organizations.
 This will also help in the payment of dividends.
 There will also be the fair and true value in the price of the assets as listed in
the statements of finance in the organization.
 It will assist in showing the true and fair rate of return of the capital those are
employed.

 The revaluation of the assets helps in providing the current status and value
of the assets to the investors (Benson et al., 2015).
Conclusion
It can be concluded by saying that it is vital to make the disclosures in the statement
of finance because it will assist the organization to thrive on to the different aspect of
the reporting of finance. The market of securities or the investor or any other
companies get interested in the statement of finance of the company. NCI’s special
effect is to be presented in the statement of finance of the organization. The
organizations which hold a maximum of fifty percent of the share of the subsidiary
company has the right to disclose the NCI as equity of owners. Hence, if there are no
such conditions available then it would not assist the organization to disclose their
rights of voting and equity in the organization. These are the most significant impact
of the process as it helps in giving the fair and true value of report of the
organization.
Reference:
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498.
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accounting research, 11(1), pp.119-146.
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2016. Applying IFRS standards. John Wiley & Sons.
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