Griffin Ltd: Consolidated Financial Statement Analysis Report

This report provides a comprehensive analysis of Griffin Ltd's acquisition of Frank Ltd, focusing on the financial implications and consolidation processes. The acquisition, completed on July 1, 2016, involved Griffin Ltd acquiring all issued shares of Frank Ltd. The report details the interpretation of the acquisition analysis, including the application of US GAAP and IFRS in preparing consolidated financial statements. It identifies the assumptions made during the consolidation process, such as the sale of land and inventory, and the valuation of assets and liabilities at fair market value. The report explores the complexities of acquisition analysis, highlighting the time-consuming nature of adjusting and integrating the financial records of both companies. It also outlines the purpose of the acquisition, emphasizing the potential for increased value, synergies, and reduced financial risk for Griffin Ltd. The overall analysis includes a calculation of the net identifiable assets and the preparation of consolidated financial statements, including the statement of profit and loss and other comprehensive income, and the consolidated statement of financial position. These statements reveal the financial performance and position of the combined group, including revenues, expenses, profit, assets, liabilities, and equity. The report concludes by highlighting the benefits of the acquisition, such as improved profitability and a stronger balance sheet for Griffin Ltd.

Running Head: GRIFFIN LIMITED ANALYSIS 1
GRIFFIN LIMITED ANALYSIS

GRIFFIN LIMITED ANALYSIS 2
Table of Contents
Interpretation....................................................................................................................................3
Assumptions....................................................................................................................................4
Complexities of Acquisition Analysis.............................................................................................4
Purpose of the Acquisition...............................................................................................................5
Overall analysis...............................................................................................................................6
References........................................................................................................................................8

GRIFFIN LIMITED ANALYSIS 3
Interpretation
Acquisition analysis is the analysis under which the companies merge and acquire for the growth
and the expansion of the business. When one organization controls another organization the
controlling organization is known as the parent and the controlled organization is known as the
auxiliary or the subsidiary company. Since the parent controls the working and financing choices
of the backup, it is advantageous to take a gander at both the organizations' monetary exhibition
and money related position together. United fiscal summaries are set up to accomplish this target.
US GAAP and IFRS require the combined budget summaries to be set up under the securing
strategy (Street of Walls, 2018).
In the procurement strategy, the parent incorporates every asset of the auxiliary on its merged
accounting report and incorporates all the backup's incomes and costs in its solidified incomes
and costs as it’s done in case of the Griffin Limited and Frank Limited . It makes a segment
called 'non-controlling interest' or 'minority enthusiasm' in its value segment which speaks to the
case of others on the auxiliary's net resources. A detail additionally shows up on the solidified
salary proclamation underneath net gain which speaks to overall gain inferable from the non-
controlling interest (Damodaran, 2016).
As per the requirements the GRIFFIN LIMITED has acquired Frank Limited for the
consideration of $320000. The company had a loss of $24800 while acquiring the business of the
Frank Limited. Following are the assumptions which have been taken or the reasons due to
which the company is affected by the process of the consolidation (Loughran and McDonald,
2016).

GRIFFIN LIMITED ANALYSIS 4
Assumptions
 All the entries under the process of the consolidation are affected by the following
reasons which have been determined below.
 Sale of the land in the month of the February 2018, which is considered as the prior
period item (Rouanet and Halbert, 2016).
 The inventory was sold by 30th June 2018; this again is treated as the prior period item
 The plant was also sold in the current period in the month of the January
 The loan has been settled in the current accounting period
 The amount has been transferred to general reserve amounting to $15000 in the current
period and the amount of $13000 has been transferred in the prior period.
 Further the acquisition analysis takes the approach that everything must be measured at
fair market value, so that the amount is paid by the third party in the open market at the
time of the acquisition. The lists of the assets that are measured are tangible assets and
liabilities, non-controlling interests, goodwill, consideration paid to seller (Lee, 2018).
Complexities of Acquisition Analysis
Acquisition analysis improved the straightforwardness of mergers and acquisitions (M&A) yet it
the combination of the financial records are not made at the simpler front. Every part of
advantages and liabilities of the gained substance must be balanced for reasonable incentive in
things going from stock and contracts to supporting instruments and possibilities, to give some
examples (Caselli and Gatti, 2017). The measure of work did expected to alter and coordinate the
books of the two organizations is one primary explanation behind the extensive stretch between
concession to an arrangement by the individual sheets of chiefs and the real arrangement

GRIFFIN LIMITED ANALYSIS 5
shutting. It is one of the time consuming process and the accountants take most of the time in
determining the value of the assets and liabilities once the group company has been formed.
Purpose of the Acquisition
Merger and acquisition is kind of the corporate strategy that is used by the business that may
increase the value of the acquirer that is GRIFFI LIMITED and creating important value known
as synergies (Shepherd, 2017). The synergy is beneficial as the diversified sources of revenue by
the acquisition. The production capacity is increased and the company like GRIFIFN LIMITED
after acquiring can provide more services and at grater scale of production. The financial risk
automatically gets reduced and the company had to make potentially lower costs of the
borrowings. The GRIFFIN LIMITED can also help in increasing the research and the
development opportunities. The acquisition of another organization may likewise be cautious in
nature (Gitman, Juchau and Flanagan, 2015). For instance, an enormous organization may wish
to secure a little yet developing organization if the little organization has a significant upper hand
over the huge organization, for example, a significant innovation or patent or unrivaled item
advertising. This may shield the acquirer from genuine aggressive results, as the little
organization may after some time have the option to develop alone and eat into the huge
organization's the same old thing (DeFusco, et al 2015).

GRIFFIN LIMITED ANALYSIS 6
Overall analysis
The overall analysis of the GRIFFIN LIMITED suggests that the net identifiable asset of the
company is $295200 and the loss could have been avoided if the unguaranteed value was not
included in calculation. The next step adopted by the company is the business combination
valuation entries which will determine the post as well as the pre-acquisition entries. The table of
the adjustments has been made to determine the overall results of the new incorporated company.
Lastly the financial statements of the GRIFFIN limited are also prepared to get the overall
analysis of the profit and the assets and the liabilities of the combined group (Roca-Riu, Estrada,
and Fernández, 2016).
The financial statements that have been prepared are as follows.
GRIFFIN LIMITED
Consolidated Statement of the Profit and loss and other Comprehensive income
For the year ended 30th June 2019
Revenues 307500
Expenses 154100
Profit for period 153400
Gain on sale of non-current assets 6000
Profit before tax 159400
Income tax expense 47920
Profit for the period 111480
Other comprehensive income
Gain on revaluation of assets 12000
Comprehensive income 123480

GRIFFIN LIMITED ANALYSIS 7
The profits of the firm are $123480 post acquisition and therefore the company has built a better
organization via assistance. The income tax expense could have been reduced but again after the
incorporation the leverage gets lower only.
GRIFFIN LIMITED
Consolidated Statement of Financial position
As at 30th June 2019
Current Assets 163000
Cash 42000
Accounts receivables 40000
Inventories 81000
Non-Current Assets
Plant and Machinery 550000
Accumulated Depreciation -160000 390000
Goodwill 24800
Intangibles 12000
Total Non-Current Assets 426800
Total Assets 589800
Equity
Share capital 280000
Retained Earnings 187200
General Reserve 20000
Asset revaluation Surplus 24000
Total Equity 511200
Liabilities
Current Liabilities
Payables 48000
Provisions 27000
Total Current Liabilities 75000
Non-Current Liabilities
Deferred Tax Liability 3600
Total Liabilities 78600
Total Equity and Liabilities 589800
The balance sheet on the other hand is the statement that determines the valuation of the assets
and the liabilities of the combined organization. The position of the cash in hand is sound

GRIFFIN LIMITED ANALYSIS 8
however; the liabilities are still not reduced. The goodwill will be amortized over the period of
the time and the benefit to the company is the assets have been acquired to promote the
combined business.

GRIFFIN LIMITED ANALYSIS 9
References
Caselli, S. and Gatti, S. eds., 2017. Structured finance: Techniques, products and market.
Springer.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and corporate
finance (Vol. 324). John Wiley & Sons.
DeFusco, R.A., McLeavey, D.W., Pinto, J.E., Anson, M.J. and Runkle, D.E., 2015. Quantitative
investment analysis. John Wiley & Sons.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Lee, D., 2018. Commercialisation, Consolidation and Cultural Value: The Restructuring of the
British Independent Television Industry. In Independent Television Production in the UK (pp.
177-193). Palgrave Macmillan, Cham.
Loughran, T. and McDonald, B., 2016. Textual analysis in accounting and finance: A
survey. Journal of Accounting Research, 54(4), pp.1187-1230.
Roca-Riu, M., Estrada, M. and Fernández, E., 2016. An evaluation of urban consolidation
centers through continuous analysis with non-equal market share companies. Transportation
Research Procedia, 12, pp.370-382.
Rouanet, H. and Halbert, L., 2016. Leveraging finance capital: Urban change and self-
empowerment of real estate developers in India. Urban Studies, 53(7), pp.1401-1423.
Shepherd, J., 2017. Consolidation and innovation in the pharmaceutical industry: the role of
mergers and acquisitions in the current innovation ecosystem.
Street of Walls, (2018) Merger and Acquisition [Online] Available from
http://www.streetofwalls.com/finance-training-courses/investment-banking-technical-training/
mna-valuation-techniques/ [Accessed on 24th May 2019].