Date of acquisition: 1 Jan 20x3

Date of consolidation: 31 Dec 20x6

Consideration transferred
FV INA @ acquisition
FV NCI @ acquisition
Total Goodwill

CJE 1: Elimination of investment in S Co

Dr Share capital
Dr Retained earnings
Dr FA
Dr Goodwill
Cr Investment in X Co
Cr NCI
Cr DTL

CJE 2: Allocate share of post-acquisition RE to NCI

Dr Opening RE
Cr NCI (B/S)

CJE 3: Eliminate dividends declared by S co

Dr Dividend income (P I/S)
Dr NCI (B/S)
Cr Dividends declared (S B/S)

CJE 4: Eliminate intercompany payable and receivable

Dr Amount due to S Co (P B/S)
Cr Amount due from P Co (S B/S)

CJE 5: Additional past depreciation on undervalued FA

Dr Opening RE
Dr NCI
Cr Accumulated Depreciation

CJE 6: Tax on CJE 5

Dr DTL
Cr Opening RE
Cr NCI

CJE7: Current additional depreciation on undervalued FA

Dr Depreciation expense
Cr Accumulated depreciation

CJE 8: Tax on CJE 5

Dr DTL
Cr Tax expense

CJE 9: Eliminate unrealised profit on upstream intercompany construction contract

Dr Opening RE
Dr NCI
Cr Software

CJE 10: Tax on CJE7

Dr DTA
Cr Opening RE
Cr NCI

CJE 11: Past realisation of profit on software through reduction of amortisation

Dr Accumulated Amortisation
Cr Opening RE
Cr NCI

CJE 12: Tax on CJE9

Dr Opening RE
Dr NCI
Cr DTA

CJE 13: Reverse overimpairment of software

Dr Accumulated impairment loss (P B/S)
Cr Opening RE
Cr NCI

CJE14: Tax on CJE 11

Dr Opening RE
Dr NCI
Cr DTA

CJE 15: Current realisation of profit on software through reduction of amortisation

Dr Accumulated Amortisation
Cr Amortisation expense
CJE 16: Tax on CJE 5
Dr Tax expense
Cr DTA

CJE17: Adjust unrealised loss on past and current year intercompany downstream inventory t
Dr Inventory
Dr COS
Cr Opening RE

CJE 18: Tax on CJE 13

Dr Opening RE
Cr Tax expense
Cr DTL

CJE 19: Allocate current year profits to NCI

Dr Income allocated to NCI (I/S)
Cr NCI (B/S)
NPAT S Co 31 Dec 20x6
Additional depreciation on undervalued FA (Tax adjusted)
Realisation of profit on software through reversal of amortisation (Tax adjusted)

NCI's share 10%

1,820,000 (1)
1,340,000 (2)
180,000 (3)
660,000 (4) (4) = (1) + (3) - (2)

620,000
520,000
250,000
660,000
1,820,000
180,000
50,000 20%*250000

20,000 10%*(720000-520000)
20,000

90,000 90%*100000
10,000 10%*100000
100,000

150,000
150,000

Useful life 1 Jan 20x3 20

33,750 Useful life 31 Dec 20x5 17
3,750 FV>BV 250000
37,500 Dep/yr 12500

7,500
6,750
750
12,500
12,500

2,500
2,500

Project commencement
63,000 Project completion
7,000 % of year in prorgress
70,000 Useful life from 1 Jan 20x
Progress billings closed on 31 Dec 20
Rev Silver Co 20x4
14,000 Profit Silver Co 20x4
12,600 Cost Silver Co 20x4
1,400 Constructrion WIP (actual costs incu

7,000 70000/10
6,300
700

1,260
140
1,400
VIU
FV-CTS
15,000 CA (what is)
13,500 CA (what should be)
1,500 Impairment loss

TP
2,700 CA before transfer
300 CA 31 Dec 20x5 (what sho
3,000 CA 31 Dec 20x5 (what is)
NRV 31 Dec 20x5
Loss on transfer
5,333 Realised loss
5,333 Remaining loss
 Impairment loss
Unrealised loss 31 Dec 2
1,067
1,067

g additional impairment loss

667 6000/9
5,333
6,000

1,200
1,067
133

98,967
98,967
995,400
-10,000
4,267
989,667
98,967
 1 Mar 20x4 S Co
31 Dec 20x4 Dr Construction WIP 350000
5/6 Dr Construction costs 280000
10 Cr Materials, cash, payables etc 280000
s closed on 31 Dec 20x4 Cr Construction revenue 350000
350000
70000 Dr AR 350000
280000 Cr Progress billings 350000
WIP (actual costs incurred to date + profit earned to date)
Dr Progress billings 350000
Cr Construction WIP 350000

Dr AR 350000
Dr Construction costs 280000
Cr Materials, cash, payables etc 280000
Cr Construction revenue 350000
If not for interco transaction, software would be carried at 280000
Unrealised profit of 70000 to be realised through intangible asset d

300000
240000
315000 350000/10*9 Impair
252000 280000/10*9 Do not Impair
15000

80000
95000
85500 95000*0.9 Impairment
72000 0.9*80000 No Impairment
78000
15000 In 20x5,
1500 10%*15000 Unrealised loss
13500 Impairment loss
7500 Net unrealised loss
6000 13500-7500
In 20x6,
Net unrealised loss
COS
 P Co
Dr Software 350000
Cr AP 350000

e carried at 280000
gh intangible asset depreciation

New CA 300000
CA what should be 252000
New unrealised profit 48000

7500

13500
7500
 6000

666.6666666667
5333.3333333333
Date of acquisition: 1 Jan 20X4
Date of consolidation: 31 Dec 20x6
Consideration transferred

CJE 1: Recognise share of post acquisition RE of Z

Dr Investment in Z
Cr Opening RE

CJE 2: Recognise share of revaluation reserve

Dr Investment in Z
Dr Share of OCI of Z (I/S)
Cr Accumulated OCI (B/S)

CJE 3:Reclassify dividend income as a reduction of investment in Z

Dr Dividend income (I/S)
Cr Investment in Z

CJE 4: Eliminate past litigation losses

Dr Investment in Z
Cr Opening RE

CJE 5: Past year unrealised profit in intercompany upstream inventory transfer

Dr Opening RE
Cr Investment in Z

CJE 6: Allocate share of Z Co's current profit

Dr Investment in Z (B/S)
Cr Share of profits of Z (I/S)
NPAT Z Co 31 Dec 20x2
Current year reversal of litigation loss
Gain on settlement of litigation loss
Realised profit through current year sales of upstream transferred inventory
Reversal of excess impairment

P Co's 30% share

 860,000

54,000 30%*(300000-240000)
54,000

12,000
3,000 30%*(120000-110000)
15,000 30%*(120000-70000)

42,000 30%*140000
42,000

43,200 180000*30%*80%
43,200

3,600 30%*80%*60%*25000
3,600

422,988
422,988
1,343,000
16,000 20000*80%
40,000 (250000-200000)*80%
10,000 25000*50%*80%
960
1,409,960
422,988
 What is What should be
CA 10000 7500
NRV 8800 8800
Impairment 1200 0
Worksheet Approach:
FV of NCI @ acquisition date
CJE2
CJE3
CJE5
CJE6
CJE9
CJE10
CJE11
CJE12
CJE13
CJE14
CJE 19

Analytical Approach:
BV S Co 31 Dec 20x6
Undervalued fixed asset undepreciated
Unamortised software with unrealised profit

NCI's share 10%

Goodwill

0
 180,000
20,000
-10,000
-3,750
750
-7,000
1,400
700
-140
1,500
-300
98,967
282,127

2,235,400
160,000 250000/20*16*80%
-34,133
2,361,267
236,127
46,000 180000-1340000*10%
282,127
Worksheet Approach:
Investment in Z at cost 860,000
CJE1 54,000
CJE2 12,000
CJE3 -42,000
CJE4 43,200
CJE5 -3,600
CJE6 422,988
1,346,588
Analytical Approach:
BV A Co at 31 Dec 20x6 3,113,000
Unrealised profit on intercompany inventory transfer -1,040
3,111,960
P Co's 30% share 933,588
Goodwill 413,000
1,346,588
0
80%*(8800-7500)
Worksheet Approach
P Co RE 31 Dec 20x2 2,050,000
S Co RE 31 Dec 20x2 1,615,400
Q1
CJE 1 -520,000
CJE2 -20,000
CJE3 10,000
CJE5 -33,750
CJE6 6,750
CJE7 -12,500
CJE8 2,500
CJE9 -63,000
CJE10 12,600
CJE11 6,300
CJE12 -1,260
CJE13 13,500
CJE14 -2,700
CJE17 6,000
CJE18 -1,200
CJE19 -98,967
Q2
CJE1 54,000
CJE3 -42,000
CJE4 43,200
CJE5 -3,600
CJE6 422,988
3,444,261

RE of P 31 Dec 20x2 2,050,000

Share of post acqui RE S Co 985,860
Share of post acqui RE A Co 414,900
Share of depreciation of undervalued FA -36,000
Share of gain of settlement of litigation loss 12,000
Share of expense reversal for litigation loss 48,000
Share of unrealised profit on upstream software development -30,720
Unrealised loss on downstream transfer of inventory 533
Share of unrealised profit on upstream transfer inventory -312
3,444,261
0
Date of acquisition: 1 Jan 19X9
Date of consolidation: 31 Dec 20x2
Consideration transferred
FV INA @ acquisition
FV NCI @ acquisition
Total Goodwill

CJE 1: Elimination of investment in X Co

Dr Share capital
Dr Retained earnings
Dr Inventory
Dr Goodwill
Cr Investment in X Co
Cr NCI
Cr DTL

CJE 2: Allocate share of post-acquisition RE to NCI

Dr Opening RE
Cr NCI (B/S)

CJE 3: Eliminate dividends declared by X co

Dr Dividend income (P I/S)
Dr NCI (B/S)
Cr Dividends declared (S B/S)

CJE 4: Eliminate intercompany payable and receivable

Dr Amount due to X Co (P B/S)
Cr Amount due from P Co (X B/S)

CJE 5: Recognise additional COS for past and current sales of undervalued inventory, includin
Dr Opening RE
Dr NCI (B/S)
Dr COS
Cr Inventory

CJE 6: Tax on CJE 5

Dr DTL
Cr Tax Expense
Cr Opening RE
Cr NCI (B/S)
CJE 7: Adjust for unrealised profit on past upstream sale of inventory
Dr Opening RE
Dr NCI
Cr COS
Cr Inventory

CJE 8: Tax on CJE 11

Dr Tax expense
Dr DTA
Cr Opening RE
Cr NCI

CJE 9: Adjust for unrealised loss on downstream current year FA transfer, taking into account
Dr PPE
Cr Loss on sale
Cr Accumulated depreciation
Cr Accumlated impairment losses

CJE 10: Tax on CJE 13

Dr Tax Expense
Cr DTL

CJE 11: Adjust for realised loss through additional depreciation

Dr Depreciation expense
Cr Accumulated depreciation

CJE 12: Tax on CJE 16

Dr DTL
Cr Tax expense

CJE 13: Eliminate current year intergroup rental income and expense
Dr Rental income (P I/S)
Cr Rental expense (X I/S)

CJE 14: Allocate current year profit to NCI

Dr Income allocated to NCI (I/S)
Cr NCI (B/S)
NPAT X Co 31 Dec 20x2
Additional COS and write off on undervalued inventory (Tax adjusted)
Impairment loss on undervalued inventory (Tax adjusted)
Realised profit on upstream sale of inventory

NCI's share 10%

 1,000,000 (1)
848,000 (2)
100,000 (3)
252,000 (4) (4) = (1) + (3) - (2)

500,000
300,000
60,000
252,000
1,000,000
100,000
12,000 20%* 60,000

22,000 10%*(520000-300000)
22,000

36,000 90%*40,000
4,000 10%*40,000
40,000

100,000
100,000

ervalued inventory, including current year under impairment

37,800 90%*70%*60000
4,200 10%*70%*60000
16,000
58,000

11,600
3,200
7,560
840
 27,000 90%*60%*(200,000-150,000)
3,000 10%*60%*(200,000-150,000)
25,000 90%*200,000 + 10%*150,000 - 40%*200,000 - 60%*150,000
5,000 10%*(200,000-150,000)

5,000
1,000
5,400
600

ansfer, taking into account impairment loss

50,000 120,000 - 80,000
10,000
30,000
10,000
Working for CJE 13:
TP
2,000 CA
2,000 OC (PPE)
AD
FV
500 G78/10*50% Useful Life
500 Impairment loss (CA-
Artificial loss (FV-TP)

100
100

45,000 The 20x1 36,000 rental would be alr account

45,000

64,720
64,720
640,000
-9,600 20%*60,000*80%
 -3,200 4,000*80%
20,000 50%*50,000*80%
647,200
64,720
Working: Impariement?
BV CA @ 31 Dec 20x2 10000 No.
FV CA @ 31 Dec 20x2 16000 4000
NRV 12000
Additional 4000 to COS for current year.
 40%*200,000 - 60%*150,000

1 July 20x2
70,000
90,000
120,000
30,000
80,000
10
10,000 Credit accumulated impairment losses
10,000 Unrealised

36,000 rental would be alr accounted for in intergroup payable/receivable net off or cash payment was
or cash payment was made, no 20x1 transactions on 20x2 income statement.
atement.
Date of acquisition: 1 Jan 20X0
Date of consolidation: 31 Dec 20x2
Consideration transferred

CJE 1: Recognise share of post acquisition RE of Z

Dr Investment in Z
Cr Opening RE

CJE 2: Recognise share of OCI

Dr Investment in Z
Dr Share of OCI of Z (I/S)
Cr Accumulated OCI (B/S)

CJE 3:Reclassify dividend income as a reduction of investment in Z

Dr Dividend income (I/S)
Cr Investment in Z

CJE 4: Past additional depreciation on undervalued FA

Dr Opening RE
Cr Investment in Z

CJE 5: Unrealised profit on past FA transfer

Dr Opening RE
Cr Investment in Z

CJE 6: Realisation of profit on past FA transfer through elimination of excess depreciation

Dr Investment in Z
Cr Opening RE

CJE 7: Allocate share of Z Co's current profit

Dr Investment in Z (B/S)
Cr Share of profits of Z (I/S)
NPAT Z Co 31 Dec 20x2
Add: Current year depreciation of undervalued FA
Less: Current year depreciation of interco FA transfer unrealised profit

P Co's 30% share

 600,000

18,000 30%*(300000-240000)
18,000

6,000
15,000 30%*(100000-150000)
21,000 30%*(150000-80000)

30,000 30%*100000
30,000

9,600 30%*80%*40000
9,600

7,200 30%*80%*30000
7,200

depreciation
720 30%*80%*30000/5*0.5
720

209,940
209,940
711,000
-16,000 20000*80%
4,800 30000/5*80%
699,800
209,940
FV>BV 200000
Useful life at 1 Jan 20x0 10
Useful life at 31 Dec 20x1 8
Dep/yr 20000
Dep as of 31 Dec 20x1 40000

Date of transfer: 1 July 20x1

TP 150000
NBV 120000
Gain on transfer 30000
Useful Life I July 20x1 5
Useful life 31 Dec 20x1 4.5
Worksheet Approach:
FV of NCI @ acquisition date
CJE2
CJE3
CJE5
CJE6
CJE7
CJE 8
CJE 14

Analytical Approach:
BV X Co 31 Dec 20x2
Undervalued Inventory Unsold (Tax adjusted)
Impairment loss on undervalued inventory unsold (Tax adjusted)
Unrealised profit on upstream inventory transfer

NCI's share 10%

Goodwill
 100,000
22,000
-4,000
-4,200
840
-3,000
600
64,720
176,960

1,620,000
4,800 10%*80%*60,000
-3,200 80%*4,000
-4,000 10%*80%*50000
1,617,600
161,760
15,200 100,000 - (10%*848,000)
176,960
Worksheet Approach:
Investment in Z at cost 600,000
CJE1 18,000
CJE2 6,000
CJE3 -30,000
CJE4 -9,600
CJE5 -7,200
CJE6 720
CJE7 209,940
787,860
Analytical Approach:
BV Z Co at 31 Dec 20x2 1,711,000
FV over BV of undepreciated undervalued fixed asset 112,000
Unrealised profit on intercompany FA transfer -16,800
1,806,200
P Co's 30% share 541,860
Goodwill 246,000
787,860
200000/10*7*80%
30000/5*3.5*80%
Worksheet Approach
P Co RE 31 Dec 20x2 3,120,000
X Co RE 31 Dec 20x2 1,120,000
Q1
CJE1 -300,000
CJE2 -22,000
CJE3 4,000
CJE5 -53,800
CJE6 10,760
CJE7 -2,000
CJE8 400
CJE9 10,000
CJE10 -2,000
CJE11 -500
CJE12 100
CJE13 -64,720
Q2
CJE1 18,000
CJE3 -30,000
CJE4 -9,600
CJE5 -7,200
CJE6 720
CJE7 209,940
4,002,100

RE of P 31 Dec 20x2 3,120,000

Share of post acqui RE X Co 738,000
Share of post acqui RE Z Co 201,300
Share of additional COS on undervalued inventory -41,760
Share of additional depreciation on undervalued FA -14,400
Share of unrealised profit on upstream transfer X -3,600
Unrealised loss on downstream transfer X 7,600
Share of unrealised profit on downstream transfer Z -5,040
4,002,100
0