Group Accounting principles chapter 0 ĐCKTTD

slide note of group accounting

1. PRINCIPLES OF
GROUP
ACCOUNTING

2. CONTENT
Business combination
Consolidation
Investment in associate

3. VAS
(IAS/IFRS)
in group
accounts
VAS 25 (IFRS 10, IAS 27): Consolidated
and separate financial statements
VAS 07 (IAS28): Investments in
associates
VAS 11 (IFRS03): Business
combinations.
VAS 08 (IFRS 11) Joint Arrangements
1. BUSINESS COMBINATION

4. 1.BUSINESS COMBINATION
Business combination is defined as a transaction
or other event in which an acquirer obtains
control of one or more businesses
The combination of business entities by merger or
acquisition is very frequent

5. 1.BUSINESS COMBINATION
Reasons for Combinations
1-5
COST ADVANTAGELOWER RISKFEWER OPERATING
DELAYS
AVOIDANCE OF
TAKEOVERS
ACQUISITION OF
INTANGIBLE ASSETS
OTHERS

6. 1.BUSINESS COMBINATION
Legal Form of Combination
1-6
Merger
Consolidation
Stock acquisition: Parent-Subsidiary relationship

7. 1-7
Merger: Occurs when one
corporation takes over all
the operations of another
business entity and that
other entity is dissolved.
Consolidation : Occurs
when a new corporation is
formed to take over the
assets and operations of
two or more separate
business entities and
dissolves the previously
separate entities.
A stock acquisition:
Occurs when one
corporation pays cash or
issues stock or debt for all
or part of the voting stock
of another company, and
the acquired company
remains intact as a
separate legal entity.
1.BUSINESS COMBINATION
Legal Form of Combination

8. 1-8
Stock acquisition: Parent-Subsidiary relationship
Whentheacquiringcompanyacquiresacontrolling
interestinthevotingstockoftheacquiredcompany
(forexample,ifACompanyacquires50%ofthe
votingstockofBCompany),aparent–subsidiary
relationshipresults.
FinancialStatementsofACompany+Financial
StatementsofBCompany=ConsolidatedFinancial
StatementsofACompanyandBCompany
1.BUSINESS COMBINATION
Legal Form of Combination

9. Acquisition accounting/Pooling of interests accounting
Business Combinations9
OnDecember31,yearN,MasonCompanywas
mergedintoSaxonCorporation(thesurvivor).
Bothcompaniesusedthesameaccounting
principlesforassets,liabilities,revenue,and
expensesandbothhadaDecember31fiscalyear.
Example 1:
Acquisition accounting For Merger, with Goodwill

10. Example 1:
Acquisition
Accounting
For Merger,
with
Goodwill
(contd.)
Business Combinations10
-Saxonissued150,000sharesofits$10par
commonstock(currentfairvalue$25a
share)toMason’sstockholdersforall
100,000issuedandoutstandingsharesof
Mason’sno-par,$10statedvaluecommon
stock.
-Inaddition,Saxonpaiddirectcosts
associatedwithbusinesscombination:
Totaldirectcostsofbusinesscombination:
$66,250
-There was no contingent consideration in
the merger contract.

11. Business Combinations11
Example 1 (contd.): Mason Company’s
Condensed B/S Prior to The Merger
•MASONCOMPANYBalanceSheet(priorto
businesscombination)
•December31,YearN
Assets
Current assets$1,000,000
Fixed assets (net)3,000,000
Other assets600,000
Total assets4,600,000
(Continued)

12. Business Combinations12
Example 1 (contd.): Mason Company’s
Condensed B/S Prior to The Merger(contd.)
•MASON COMPANY
•Balance Sheet (contd.) , 12/31/N
Liabilities & Stockholders’Equity
Current Liabilities$ 500,000
Long-term debt1,000,000
Common stock, at par $101,000,000
Share premium700,000
Retained earnings1,400,000
Total liabilities & stockholders’equity$4,600,000

13. Business Combinations13
Example 1 (contd.): Fair Value of
Identifiable Net Assets of Combinee
Current assets$ 1,150,000
Fixed assets3,400,000
Other assets600,000
Current liabilities(500,000)
Long-term debt(1,000,000)
Identifiable net assets of combinee$3,650,000

14. Business Combinations14
Example 1 (contd.): Journal Entries
DR Current Assets1,150,000
DR Fixed Assets3,400,000
DR Other Assets600,000
DR Goodwill166,250
CR Current Liabilities500,000
CR Long-Term Debt1,000,000
CR Common stock
(150,000 x $10)1,500,000
CR Share premium in Excess of Par (150,000 x ($25-$10))2,250,000
CR Cash66,250

15. Business Combinations15
Example 1: Pooling-of-Interests
Accounting for Statutory Merger
Applyingthepooling-of-interestsaccounting
methodontheExample(thebusinesscombination
ofSaxonandManson),thefollowingjournalentries
wouldbepreparedinSaxonCorporation’s
accountingrecords:

16. Business Combinations16
Example 1 : Pooling-of-Interests
Accounting for Statutory Merger (contd.)
Journal Entries for Saxon Corp. 12/31/N
Current Assets1,000,000
Fixed Assets (net)3,000,000
Other Assets600,000
Current Liabilities500,000
Long-term Debt1,000,000
Common Stock, $10 par1,500,000
Share premium in Excess of Par200,000
Retained Earnings1,400,000
To record merger with Mason Company as a pooling of interests.

17. Business Combinations17
Example 1: Pooling-of-Interests
Accounting for Statutory Merger (contd.)
12/31/N (J. E. contd.)
Expenses of Business
Combination66,250
Cash66,250
To record payment of direct costs Incurred in merger with Mason Company

18. Business Combinations18
Advantage of Using Pooling
Accounting on Financial Numbers
1.AdvantageonthePost-MergerEarnings:
•Thefollowingexhibitshowsthebalancesheet
statementaccountsofpoolingaccountingversus
acquisitionaccountingusingtheexampleofSaxon
andMason:

19. Business Combinations19
Advantage of Using Pooling Accounting
on Financial Numbers (contd.)
Acquisition AccountingPooling Accounting
Current Assets1,150,0001,000,000
Fixed Assets3,400,0003,000,000
Other Assets600,000600,000
Good will166,250
Expense of Business
Combination
66,250
(Continued)

20. Business Combinations20
Advantage of Using Pooling Accounting
on Financial Numbers (contd.)
Acquisition AccountingPooling Accounting
Current Liabilities500,000500,000
Long-Term Debt1,000,0001,000,000
Common Stock,
$ 10 par 1,500,0001,500,000
Paid-in Capital in
Excess of Par2,116,250200,000
Retained Earnings1,400,000
Cash 200,000200,000
To record merger with Mason Company.

21. •Acquisition date – Thedateonwhichtheacquirerobtainscontrolof
theacquiree
•Control – rights to variable returns and ability to affect them through
exercise of power
•Subsidiary – entity controlled by a parent
•Consolidated financial statements – The financial statements of a
group in which the assets, liabilities, equity, income, expenses and cash
flows of the parent and its subsidiaries are presented as those of a single
economic entity
•Non-controlling interest – equity in a subsidiary which is not
attributable to a parent
•Goodwill – isanassetrepresentingthefutureeconomicbenefits
arisingfromotherassetsacquiredinabusinesscombinationthatare
notindividuallyidentifiedandseparatelyrecognised
Definitions
2.CONSOLIDATION

22. P
A1
S1
S2S2.1
VAS25
(IFRS10,IAS 27)
–Consolidated
and separate FS
Subsidiary: An entity that is
controlledby another entity
(known as parent). [S1, S2]
Sub-Subsidiary: S2.1
2.CONSOLIDATION

23. P
A1
S1
S2S2.1
VAS25
(IFRS10,IAS 27)
–Consolidated
and separate FS
Parent : An entity that has
one or more subsidiaries
2.CONSOLIDATION

24. P
A1
S1
S2S2.1
VAS25
(IFRS10,IAS 27)
–Consolidated
and separate FS
Group : A Parent
and all its
subsidiaries
Non-controlling interest: The
equity in subsidiary not
attributable, directly or indirectly to
a parent
2.CONSOLIDATION

25. CONTROL?
Thepowertogovernthefinancialand
operatingpoliciesofanentitysoasto
obtainbenefitsfromitsentity.
In general: A owns > 50% voting power of B àA controls
B àA: Parent; B: Subsidiary
Other cases:
üBy statue or an agreement
üHas power to appoint or remove a majority of members of BOD
üHas power to cast a majority of votes at meetings of BOD
üHas power over 50% voting rights by agreement with other
investors
2.CONSOLIDATION

26. P
A1
S1
S2S2.1
VAS07 (IAS 28)
–Investment in
associate
Associate:Anentity
inwhichaninvestor
hassignificant
influence[A1]
#Tradeinvestment:isasimple
investmentinthesharesofanother
entity,thatisnotanassociateora
subsidiary.
2.CONSOLIDATION

27. SIGNIFICANT
INFLUENCEThe power to participate, but not to
control
In general: Hold> 20% of voting rights
Other cases:
ürepresentation on the BODof the investee;
üparticipation on the policy making process;
ümaterial transactionbetween investor and investee;
üinterchange of management personnel;
üprovision of essential technical information.
2.CONSOLIDATION

28. CONSOLIDATION?Fromthelegalpointofview,
theresultsofthegroupmust
bepresentedasawhole.
Consolidationmeanspresentingtheresultsofagroupof
companiesasiftheywereasinglecompany.
2.CONSOLIDATION

29. Steps in applying the acquisition method:
•Identificationoftheacquirer
•Determinationoftheacquisitiondate
•Recognitionandmeasurementoftheidentifiable
assetsacquired,theliabilitiesassumedandany
non-controllinginterest(NCI,formerlycalled
minorityinterest)intheacquiree.
•Recognitionandmeasurementofgoodwillora
gainfromabargainpurchase
2.CONSOLIDATION

30. Measurement of acquired assets and
liabilities. /Measurement of NCI.
•Assetsandliabilitiesaremeasuredattheir
acquisition-datefairvalue(withalimitednumber
ofspecifiedexceptions).
•IFRS3allowsanaccountingpolicychoice,
availableonatransactionbytransactionbasis,to
measureNCIeitherat:
–fairvalueor
–theNCI'sproportionateshareofnetassetsof
theacquiree.(VAS)
2.CONSOLIDATION

31. Principles for Consolidation
Consolidation means adding together
Consolidation means cancellationof like items
internalto the Group (intra-group transactions)
Consolidation as if you own everything
then show the extent to which you do not own.
NCI
2.CONSOLIDATION

32. Principles for Consolidation
AppleCoowns60%ofPearCo.Applehasnon-currentassetsof
$80,000andPearhasnon-currentassetsof$50,000
Consolidatednon-currentassetsiscalculatedas
$
Apple80,000
Pear60%x$50,00030,000
110,000
Trueoffalse?
Explainyouranswer.
Example 2
2.CONSOLIDATION

33. Example 3
SocketCohas100,000sharesof$1each.On1
January20X3,PowerCoacquired45,000ofthese
shares.Inaddition,PowerCoisabletoappointfour
outofthefivedirectorsofSocketCo,thus
exercisingcontrolovertheiractivities.
HowshouldSocketCobetreatedinthe
consolidatedfinancialstatementsofPowerCo?
2.CONSOLIDATION

34. Example 4
PCo,acquires25,000ofthe100,000$1ordinary
sharesinACofor$60,000on1January20X8.In
theyearto31December20X8,ACoearnsprofits
aftertaxof$30,000,fromwhichitpaysadividend
of$6,000
HowwillACo’sresultsbeaccountedforinthe
individualandconsolidatedaccountsofPCofor
theyearended31December20X8?
2.CONSOLIDATION

35. Example 5
WhichTWOofthefollowinginvestmentswouldbetreatedas
anassociateintheconsolidatedfinancialstatementsofSmith
Co?
A.SmithCoowns15%oftheordinarysharesofRedCoand
hassignificantinfluenceoverRedCo
B.SmithCoowns45%oftheordinarysharesofPinkCoand
canappoint4outof5directorstotheBoardofDirectorsof
PinkCo
C.SmithCoowns40%ofthepreferenceshares(non-voting)
and15%oftheordinarysharesofYellowCo.
D.SmithCoowns60%ofthepreferenceshares(non-voting)
and40%oftheordinarysharesofAquamarineCo.
2.CONSOLIDATION

36. Goodwill: $$
ConsiderationtransferredX
Amountofnon-controllinginterestsX
Thefairvalueofanypreviouslyheldequity
interest(IFRS3)
X
LESS:The recognisedamount of the acquiree’s
identifiable net assets:
(X)
GoodwillXX
Goodwill is determined on the date the acquirer obtains control.
Goodwill arising on consolidation isrecognized as an assetin the consolidated
statement of financial position (CBS).
Negative Goodwill àrecognisedimmediatelyin the income statementas a gain
2.CONSOLIDATION

37. Costofinvestmentincludes:
•Cashpaid
•Fairvalue(i.e.Marketvalue)ofanyother
consideration(e.g.shares-for-shareexchange,
deferredorcontingentconsideration,loannote)
•Professionalfeesandsimilarincrementalcosts
incurreddirectlyrelatedtotheacquisition
(IFRS3-No)
2.CONSOLIDATION

38. 38
By cashBy share exchange
(based on current market
value on acquisition date
DR Investment in Sub
CR Share Capital
CR Share Premium
If paid now
DR investment in Sub
CR Cash
If paid later (in P’s book)
DR Investment in Sub
CR Deferred Consideration
CostofinvestmentinSubareaccountedforatcostwhichisthefairvalue
ofconsiderationgiven
P issues loan note as part
of purchase consideration
DrInvestment
Cr Liabilities
2.CONSOLIDATION

39. 39
•IFRS3definescontingentconsiderationas:
‘Usually,anobligationoftheacquirertotransfer
additionalassetsorequityintereststotheformer
ownersofanacquireeaspartoftheexchangefor
controloftheacquireeifspecifiedfutureevents
occurorconditionsaremet.
2.CONSOLIDATION
Contingent consideration

40. 40
•revisedstandardrequirestheacquirertorecognisethe
acquisition-datefairvalueofcontingentconsideration
aspartoftheconsiderationfortheacquiree.
•This‘fairvalue’approachisconsistentwiththewayin
whichotherformsofconsiderationarevalued,and
•fairvalueisdefinedas:‘Theamountforwhichanasset
couldbeexchanged,oraliabilitysettled,between
knowledgeable,willingpartiesinanarm’slength
transaction
Contingent consideration
2.CONSOLIDATION

41. Entity(SCo.)isnotallowedtorecognizeintangibleassetsinternally
generated
i.e.‘market-related’,‘customer-related’,‘artistic-related’or
‘technology-related’intangibleassets….
IfPacquiredSandidentifyaboveintangibleassetswithreliable
measurement.
àTheseassetsshouldbeincludedintheconsolidatedstatementof
financialpositionasintangibleassets,andaccountedforassuch.(They
shouldbeamortisedandmightalsobesubjecttoimpairment.)
Acquired intangible assets
2.CONSOLIDATION

42. Example6:
ParententityPacquired100%oftheequityofentitySon14JulyYear6at
apriceof$9million.ThefairvalueofthenetassetsofSatthisdatewas
$6.5million,butinadditionPrecognizesamarket-relatedintangibleasset
ofSwhichitvaluesat$900,000.
Thisintangibleassetshouldbeincludedintheconsolidatedstatementof
financialposition,initiallyatcostbutthenatcostlessaccumulated
amortisationandimpairment.
Required:CalculateGW
Acquired intangible assets 2.CONSOLIDATION

43. Acquired intangible assets
$
Fair value ofnet assets acquired6,500,000
Plusvalue of market-related intangible
asset
900,000
7,400,000
Costof acquisition9,000,000
Goodwill1,600,000
2.CONSOLIDATION

44. Cost of investment
Example7:
Theparentacquired60%ofcompanyX’s$100m
ordinarysharecapitalon1/1/Nforacashpayment
of$150mandafurtherpaymentof$50mon
31/12/Nofthesubsidiary’spostacquisitionprofits
haveexceededanagreedfigurebythatdate.
Inthefinancialstatementsfortheyearto31/12/N
$50mwillbeaddedtothecostofthecombination
discountedasappreciate.
•Thecostofcombination?
2.CONSOLIDATION

45. Example8:Costofinvestment
Jackacquires24million$1shares(80%)oftheordinary
sharesofBeckybyofferingashareforshareexchangeof
twosharesforeverythreesharesacquiredinBeckyanda
cashpaymentof$1persharepayablethreeyearslater.
Jack'sshareshaveanominalvalueof$1andacurrent
marketvalueof$2.Thecostofcapitalis10%and$1
receivablein3yearscanbetakenas$0.75.
•Calculatethecostofinvestmentandshowthe
journalstorecorditinJack'saccounts.
2.CONSOLIDATION

46. •Solution:
•(i)Costofinvestment
2.CONSOLIDATION

47. $50m is the cost of investment for the purposes of the
calculation of goodwill.
Journals in Jack's individual accounts:
2.CONSOLIDATION

48. Principle:Consolidationasifyouowneverythingthen
showtheextenttowhichyoudonotown.
Definition:AproportionofthenetassetsoftheSub.Coin
factbelongstoinvestorsfromoutsidethegroupwhichwe
callNon-controllingInterests(NCI)
Recognition:NCI is shown in the equity sectionof the
consolidated BS
Non-controlling interests
2.CONSOLIDATION

49. Method 1: Proportionate method -Partial GW (IFRS 3,
VAS 11)
Not recogniseany goodwill for the NCIin the
consolidated statement of financial position.
Example:iftheNCIinasubsidiaryis30%andthe
identifiablenetassetsofthesubsidiaryare$1,000,000,the
NCIshouldbeincludedintheconsolidatedstatementof
financialpositionat$300,000.
2methodsallowedbyIFRS3tocalculateNCI
2.CONSOLIDATION

50. Method2:Fairvaluemethod(IFRS3-FullGW)
RecognisethegoodwillattributabletotheNCIintheconsolidated
statementoffinancialposition,asatthedateofacquisition.
Thisgoodwillcannotsubsequentlybere-valued,unlessthereis
impairmentandthegoodwillshouldthenbewrittendowninvalue.
$
FVofNCIatacquisitionX
PlusNCI’sshareofpost-acquisitionretainedearnings
(&otherreserves)
X
NCIatreportingdateXX
2.CONSOLIDATION

51. GOODWILL
X
X
(X
)
X
•Consideration*
•Non-controlling interest**
•Less: Identifiable net assets*
•Goodwill at acquisition
•* At fair value
•** At fair value or share of identifiable net assets
•Recognise as an asset on acquisition
•Allocation within 10 years (VAS 11)
•Test annually for impairment (IFRS 3)
2.CONSOLIDATION

52. Non –controlling interests (NCI)
NCI at reporting date:
+ FV of NCI at acquisition
+ NCI’s share of post-acquisition RE
+ Other reserves of Subsidiary
2.CONSOLIDATION

53. Example 9
•Missileacquiresasubsidiaryon1January2008.
Thefairvalueoftheidentifiablenetassetsofthe
subsidiarywas$2,170m.Missileacquired70%of
thesharesofthesubsidiaryfor$2.145m.TheNCI
wasfairvaluedat$683m.
•Requirement:
•Comparethevalueofgoodwillunderthepartial
andfullmethods.
2.CONSOLIDATION

54. •Solution
•Goodwill based on the partial and full goodwill methods under IFRS 3
•(Revised) would be:
•Partial goodwill $m
•Purchase consideration ………….………….2, 145
•Fair value of identifiable net assets……….. (2,170)
•NCI (30% x 2,170) …………………………..651
•Goodwill …………………………………….626
•Full goodwill $m
•Purchase consideration …………………….2, 145
•NCI …………………………………………..683
•…………………………………………… 2,828
•Fair value of identifiable net assets……… (2,170)
•Goodwill …………………………………658
•The difference between the goodwill computed using full goodwill method & partial goodwill method gives the goodwill attributable to the NCI.
2.CONSOLIDATION

55. Pre –acquisition profit of
Subsidiary
Acquisition date
Post –acquisition profit of
subsidiary
notincludedas
retainedearningsin
theconsolidated
financialstatements
–theyaredealtwith
aspartofthe
purchasedgoodwill
calculation
includedingroupprofits
intheconsolidated
statementof
comprehensiveincome,
asapartoftheprofitsof
theentiregroup.They
arealsoincludedinthe
retainedearningsofthe
group,andsoare
includedinthe
consolidatedstatement
offinancialposition.
Acquiring a subsidiary after incorporation
2.CONSOLIDATION

56. Example10:
SupposetheaccountsofSCo,a60%subsidiaryofPCo,show
retainedearningsof$20,000attheendofthereportingperiod,of
which$14,000wereearnedpriortoacquisition.Thefigureof
$20,000willappearintheconsolidatedstatementoffinancial
positionasfollows.
2.CONSOLIDATION
Example 10

57. •arethereserveswhichexistinasubsidiarycompanyatthedatewhenitisacquired.Theyarecapitalisedatthedateofacquisitionbyincludingtheminthegoodwillcalculation.
Pre-acquisitionprofits
•areprofitsmadeandincludedintheretainedearningsofthesubsidiarycompanyfollowingacquisition.
Post-acquisitionprofits
2.CONSOLIDATION

58. Consolidation Adjustments at DOA
DrSC/SP at acquisition date
DrPre-acquisition RE and other reserves
Dr/ Cr NCA ( pre-acquisition FV adj)
DrGoodwill
Cr Investment in X co
Cr NCI at acquisition date
2.CONSOLIDATION

59. •Anentityoverwhichtheinvestorhassignificant
influenceandthatisneitherasubsidiarynoran
interestinajointventure.
•Significantinfluenceisthepowertoparticipatein
thefinancialandoperatingpolicydecisionsofthe
investeebutisnotcontrolorjointcontrolover
thosepolicies.
•Significantinfluenceisassumedwitha
shareholdingof20%to50%.
Definition
3.INVESTMENT IN ASSOCIATE

60. •Equityaccountingisamethodofaccounting
wherebytheinvestmentisinitiallyrecordedatcost
andadjustedthereafterforthepostacquisition
changeintheinvestor’sshareofnetassetsofthe
associate.
Example4:……
Principles of equity accounting
3.INVESTMENT IN ASSOCIATE

61. Theeffectofthisisthattheconsolidatedstatement
offinancialpositionincludes:
•100%oftheassetsandliabilitiesoftheparent
andsubsidiarycompanyonalinebylinebasis
•an‘investmentsinassociates’linewithinnon-
currentassetswhichincludesthecostofthe
investmentplusthegroupshareofpost
acquisitionreserves.
Principles of equity accounting
3.INVESTMENT IN ASSOCIATE

62. Theconsolidatedstatementofprofitorlossincludes:
–100%oftheincomeandexpensesoftheparent
andsubsidiarycompanyonalinebylinebasis
–oneline‘shareofprofitofassociates’which
includesthegroupshareofanyassociate’sprofit
aftertax.
Principles of equity accounting
3.INVESTMENT IN ASSOCIATE

63. Is not consolidation (i.e. on a line by linebasis)
•Increase/decreasecostofinvestmentbyinvestor’s%of
associate’spost-acquisitionprofitsorlosses
–Carrying amount is single lineitem
–Already includesgoodwill
–Dividends received reduce carryingamount
•Other side of entry is profit or loss
3.INVESTMENT IN ASSOCIATE

64. Dividends from associates
Dividendsfromassociatesareexcludedfromthe
consolidatedstatementofprofitorloss;thegroup
shareoftheassociate’sprofitisincludedinstead.
3.INVESTMENT IN ASSOCIATE

65. Accounting for Associate
In a separate FSs of the parent
1/Cost of investment
Dr Investment in X co
Cr Cash
Cr Ordinary share capital / Share premium
2/When dividend is declared by the associate
Dr Dividend receivable/Other receivables
Cr Dividend income/Finance income
(= P share x dividend declared)
3/Divided paid by the associate
Dr Cash
Cr Dividend receivable/ Other receivable

66. Accounting for Associate
In a consolidated FSs of the parent
The investment in associate should be shown as:
Cost of the investment in the associate;
Plus
Group share of post –acquisition profits / loss;
Less
Any amount paid out as dividend; and
Any unrealized profit (intra-group transactions)

67. Accounting for Associate
In a consolidated FSs of the parent
Cost of the investment in the associate
1/Group share of post acquisition
Profit:
Dr Investment in associate
Cr Group share of post -acquisition profit of
associate
Loss:
Dr Group share of post -acquisition loss of associate
Cr Investment in associate

68. Accounting for Associate
InaconsolidatedFSsoftheparent
2/Eliminationofintra-groupdividend:
DrDividendincome
CrInvestmentinA
3/Unrealizedprofit
+Associate=seller
theprofitelementisincludedintheassociatecompany’saccountsandthe
parentholdstheinventory.
Dr.Groupretainedearnings
Drshareofpost-acquisitionprofitofassociate
Cr.Groupinventory
+Associate=Buyer
theprofitelementsisincludedintheparentcompany’saccountsandassociate
holdstheinventory.
Dr.Groupretainedearnings
Cr.Investmentinassociate
4/TransferringofPATandRE