Scribd
Upload
1 views

Consolidated Statement of Comprehensive Income

The document outlines the preparation of the Consolidated Statement of Comprehensive Income (SOCI), detailing the process of line-by-line consolidation of financial figures from the parent and subsidiary companies. It highlights key adjustments necessary for accurate consolidation, such as impairment losses, intercompany transactions, and acquisition-related costs. Additionally, it provides a structured format for the SOCI and a calculation method for Non-Controlling Interest (NCI).

Uploaded by

arslanjutt0013
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
1 views

Consolidated Statement of Comprehensive Income

The document outlines the preparation of the Consolidated Statement of Comprehensive Income (SOCI), detailing the process of line-by-line consolidation of financial figures from the parent and subsidiary companies. It highlights key adjustments necessary for accurate consolidation, such as impairment losses, intercompany transactions, and acquisition-related costs. Additionally, it provides a structured format for the SOCI and a calculation method for Non-Controlling Interest (NCI).

Uploaded by

arslanjutt0013
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 6

Consolidated Statement of Comprehensive Income (SOCI) – Final Exam Notes

1. Consolidation Basics

• SOCI is prepared by adding line by line the figures from Sales to Total Comprehensive
Income for Parent (P) and Subsidiary (S).

• Adjustments ensure elimination of intercompany transactions and correct accounting


treatments.

• Profit after Tax (PAT) and Total Comprehensive Income (TCI) are attributed to:

• Shareholders of P

• Non-Controlling Interest (NCI)

2. Key Adjustments in Consolidation

(a) Impairment Loss for the Year

• Loss on Other Assets:

• Added to “Admin Expenses” or “Cost of Sales”.

• Deducted from “S’s PAT” in NCI working.

• Loss on Goodwill:

• If NCI is at Proportionate Share: Added to “Admin Expenses”.

• If NCI is at Fair Value:

• Added to “Admin Expenses”.

• Deducted from “S’s PAT” in NCI working.

(b) Acquisition-Related Costs

• Expensed as Finance Cost or Admin Expenses in the first year of acquisition.

(c) Intercompany Sales


• Eliminate from:

• Sales

• Cost of Sales (or Purchases, if detailed).

(d) Intercompany Management Fees

• Eliminate from:

• P’s Other Income

• S’s Admin Expenses

(e) Unrealized Profit in Inventory (URP)

• URP Calculation:

• URP = Inventory × GP margin %

• OR = Inventory × GP markup / (100 + GP markup)

• Adjustments:

• P to S sale: URP Added to Cost of Sales.

• S to P sale: URP Added to Cost of Sales & Deducted from S’s PAT in NCI Working.

(f) Extra Depreciation for Fair Value Adjustments

• Calculation: FV Adjustment ÷ Remaining Useful Life.

• Adjustments:

• Added to “Cost of Sales” or “Admin Expenses”.

• Deducted from “S’s PAT” in NCI Working.

(g) Intercompany Sale of Non-Current Asset

• Profit Calculation: Sale Price × Margin %.


• Adjustments in Year of Disposal:

• If Sale Recorded as Sales:

• Deduct Sale Price from “Sales”.

• Deduct Cost from “Cost of Sales”.

• If S to P sale, also deduct profit from S’s PAT in NCI working.

• If Sale Recorded as Other Income:

• Deduct from “Other Income”.

• If S to P sale, also deduct from “S’s PAT in NCI working”.

(h) Excess Depreciation on Intercompany Sale of Depreciable Asset

• Calculation: Profit × Depreciation %.

• Adjustments:

• P to S Sale: Deduct from “Cost of Sales” or “Admin Expenses”.

• S to P Sale:

• Deduct from “Cost of Sales” or “Admin Expenses”.

• Add to “S’s PAT” in NCI Working.

(i) Interest on Debentures / Dividend on Preference Shares

• Ensure both entities record it using the accrual method.

• Adjustments: Deduct Parent’s share from:

• Other Income

• Finance Cost

(j) Ordinary Dividend by S

• Ensure both entities record it as per IAS.


• Adjustments: Deduct Parent’s share in Post-Acquisition Dividend from “Other Income”.

(k) Negative Goodwill

• Recognized as Income in the year of acquisition.

(l) Amortization of S’s Intangible Asset Recognized at Acquisition

• Added to “Admin Expenses”.

• Deducted from S’s PAT in NCI Working.

(m) Contingent Liability of S Recognized at Acquisition

• If the value increases during the year:

• Added to Admin Expenses.

• Deducted from S’s PAT in NCI Working.

• If S already recorded the liability, reverse its impact.

(n) Deferred Consideration Finance Cost

• Calculation:

• PV of Deferred Consideration at Year-End - PV at Start.

• OR = PV at Start × Discount Rate.

• Adjustment: Added to Finance Cost.

(o) Contingent Consideration

• Adjustment for Fair Value Change:

• Change in Fair Value Added to Admin Expenses.


(p) Transfer of Non-Cash Asset as Purchase Consideration

• If unrecorded:

• Recognize profit/loss in SOCI.

• Reverse any depreciation charged in P’s books after acquisition.

(q) Acquisition During the Year

• Time-Apportion Figures (S × n/12) unless specified otherwise.

• Adjustments:

• Intercompany eliminations apply only to post-acquisition transactions.

• Extra Depreciation on FV Adjustments calculated only for post-acquisition months.

(r) Deferred Tax Adjustments

• Tax impact of consolidation adjustments accounted for in Deferred Tax Expense.

• Adjustments:

• On P’s Adjustments: Added to Tax Expense.

• On S’s Adjustments:

• Added to Tax Expense.

• Charged to S’s PAT in NCI Working.

3. SOCI Format (Key Adjustments Included)

Consolidated Statement of Comprehensive Income

For the Year Ended XX/XX/XXXX

Particulars Adjustments
Sales (P’s + S’s × n/12 - Intercompany Sales)
Cost of Sales (P’s + S’s × n/12 - Intercompany Sales + URP + Extra
Particulars Adjustments
Depreciation)
Gross Profit (Calculated)
Distribution Costs (P’s + S’s × n/12)
Administrative Expenses (P’s + S’s × n/12 + Adjustments)
(P’s + S’s × n/12 - Intercompany Finance + Deferred
Finance Cost
Consideration Cost)
(P’s + S’s × n/12 - Intercompany Transactions + Unrecorded
Other Income
Income)
Profit Before Tax (Calculated)
Tax Expense (P’s + S’s × n/12 + Tax on Consolidation Adjustments)
Profit After Tax (Calculated)
Attributable to:
Shareholders of P XXX
Non-Controlling Interest
XXX
(NCI)
Total Comprehensive
XXX
Income

4. Non-Controlling Interest (NCI) Calculation

Adjustments to S’s PAT Impact on NCI


S’s PAT (After Tax) Start Here
(-) URP on Goods (S to P) Deduct
(-) Profit on Asset Sale (S to P) Deduct
(-) Extra Depreciation on FV Adjustments Deduct
(-) Amortization on Recognized Intangibles Deduct
(-) Increase in Contingent Liability Deduct
(-) Unrecorded Expense Deduct
(-) Impairment Loss on Other Assets Deduct
(-) Impairment Loss on Goodwill (if NCI at FV) Deduct
(+/-) Corrections Adjust
(+) Unrecorded Income Add
(+) Excess Depreciation on Asset Sale (S to P) Add
Final NCI % Share Calculated

This fin

You might also like