1：
On 1 January 2014, Wiley Ltd acquired all of the one million issued ordinary shares of B & G Ltd for a payment of $7 160 000. At the date of acquisition, the book values of the identifiable net assets of B & G Ltd. are represented by the following shareholders equity balances.
| $000 | |
| Share Capital | 4 000 |
| Retained Profits 1.1.2014 | 2 000 |
| Total Equity | 6 000 |
. In addition, the buildings of B & G Ltd have a carrying value of $400 000 but a fair value of 600 000. The buildings of B & G Ltd are depreciated over 10 years. The income tax rate is 40%.
In the next year, 2015, B & G Ltd borrowed $1 000 000 from its parent Wiley Ltd and was charged and paid $48 000 in interest. Also in 2015, B & G Ltd declared and paid a dividend of $400 000 out of profits earned during that year.
Goodwill has suffered an impairment loss of $120 000 in the year ended 31st December 2014 and a further $200 000 in the year ended 31st December 2015.
Required: Complete the following consolidation worksheet with appropriate journals.
| Consolidation worksheet for 31 December 2015 | ||||||
| Wiley Ltd | B&G Ltd | Eliminations and adjustments | Group | |||
| $000 | $000 | Dr. | ref | Cr. | $000 | |
| Sales revenue | 4 320 | 1 720 | ||||
| Interest revenue | 48 | – | ||||
| Dividend revenue | 400 | – | ||||
| Cost of sales: | ||||||
| Inventory 1.1.2015 | 1 600 | 400 | ||||
| Purchases | 2 800 | 1 200 | ||||
| Inventory 31.12.2015 | 2 360 | 800 | ||||
| Interest expense | – | 48 | ||||
| Goodwill impairment | – | – | ||||
| Other operating expenses | 328 | 112 | ||||
| Income tax expense | 320 | 120 | ||||
| Retained profits 1.1.2015 | 2 800 | 2 400 | ||||
| Dividends paid | 1 000 | 400 | ||||
| Share capital | 24 000 | 4 000 | ||||
| Asset revaluation reserve | – | – | ||||
| Borrowings payable | – | 1 000 | ||||
| Other liabilities | 2 400 | 680 | ||||
| Deferred Tax Liability | – | – | ||||
| Land | 18 000 | 5 600 | ||||
| Buildings | 800 | 400 | ||||
| Accumulated depreciation | 80 | 80 | ||||
| Current assets | 3 400 | 2 400 | ||||
| Loan receivable | 1 000 | – | ||||
| Investment in B & G Ltd | 7 160 | – | ||||
| Goodwill on acquisition | – | – | ||||
2.
Report Writing on ‘Financial Reporting Disclosures in Australian Corporate Sector’ (Word length: maximum 1000 words and at least 3 references) with clear titles or subtitles.
Collect a published annual report (year-end between 2016-2017 periods) for two Australian parent companies listed in the Australian Stock Exchange (ASX). The company web-sites can be obtained from the web-site of the ASE at http://www.asx.com.au/asx/research/listedCompanies.do?coName=Q or any other online resources. Identify their ‘consolidated financial statements’ reported in the annual reports.
Briefly summarise on goodwill method followed, revaluation of assets, impairment of goodwill, non-controlling interests (NCI) and their sharing of any goodwill if applicable.
Critically evaluate the financial reporting and disclosure followed by each parent company whether consistent with the requirements of the AASB 3 and AASB 10 for the users of general purpose financial reports. In your essay, identify the strengths and weaknesses of their reporting and disclosure as well as major differences along with your recommendations how to minimise reporting and disclosure gaps between them.
Attach a scanned copy of the ‘consolidated financial statements’ only, no need to attach ‘Notes’. Do not attach the entire annual report.
NOTE: presentation and referencing are important.
Specific and descriptive criteria to follow:
(1) a scanned copy of the ‘consolidated financial statement’ attached for both group of companies. There must be a very brief discussion of the selected listed groups of companies (i.e. parents) and their subsidiaries operating activities.
.
(2) Adequate discussion on consolidated financial statements components taken care of in the process of preparing in accordance with AASB 3 and AASB 10. A better understanding of concepts as well as group statements is expected.
(3) There must be an analysis of reporting practices as in point (3) above whether AASB 3 and AASB 10 are properly followed or not. The strengths and weaknesses of reporting should be identified from the users’ perspective. In evaluating reporting practices, any relevant comment or recommendation should be taken into account.
(4) The reporting practices of both groups of companies as in point (3) above must be compared with a decision which group is in compliance with respective AASBs than the other and why and how more compliance is achievable. In evaluating reporting practices, any relevant comment or recommendation for each group should be taken into account.
Marking criteria
While this assignment relates to the following three learning outcomes (LOs) of the unit:
demonstrate in-depth and professional understanding of how to read and interpret contemporary financial reports of groups of companies;
critically analyse and evaluate corporate group structures and prepare the following types of consolidated financial statements: consolidated statement of comprehensive income and consolidated statement of financial position;
critically analyse and evaluate extended corporate group structures and distinguish between subsidiary and associated entities and joint venture operations and entities, and their respective financial disclosure for consolidated financial statements;
You are expected to demonstrate the ability to produce, describe, analyse, and/or explain the underlying concepts and accounting frameworks to which the assignment questions are linked. The following marking criteria and weightings will be used:
Completion of acquisition analysis under the method(s) suggested and preparation of appropriate journal entries after the acquisition. (23%);
Preparation of appropriate consolidation journal entries and worksheet for consolidation (52%); and
Adequate discussion on the specified topic or issue raised by providing relevant and reasonable opinions/comments. There must have sufficient analysis of reporting practices of the selected companies/entities in compliance with the relevant accounting standards along with a solid comparison between the companies. Also requires logical flow from introduction to conclusion according to academic standards of essay writing. (25%)
