Theory and Impact of Accounting Treatment SAAB

Theory and Impact of Accounting Treatment SAAB 10 paragraph 97-99 The consolidated financial statement involves adding together the financial statement of the parent and subsidiary and making a number of adjustments. Impact of Investment on Consolidation – On 30 June 2012 Brenna should recognize profit and loss in investment on Malone. (a) Carrying amount and Fair Value of Malone asset and Liability should be consideration received to Brenna. (b) Any other different profit and loss should be recognized In Brenna Group.


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Paragraph 398 Where an entity sells some or all of the ownership Interest and the parent entity thereby lose control of that subsidiary, the gain or loss recognized on the sale shall be adjusted by the net post acquisition movement to the date of sale in the retained earnings or accumulated losses and reserves of the subsidiary. Impact of Investment on Consolidation – after 31st October 2012 Brenna should not recognize in consolidated statement of financial position on Malone due to Malone has been sold and not be a subsidiary after 31 October 2012. ) Melon’s assets and liabilities at their carrying amounts; (b) Melon’s INC at the date when control is lost. Accounting treatments for loss of control As the requirements In SAAB 10 paragraph 897 – 399, we should do the following calculation: Calculation analysis: Tyson-Malone Net fair value of identifiable assets and liabilities of Malone – $500,000 $200,000 + $150,000 + ($700,000 – = $920,000 Net fair value acquired = * $920,000 = $736,000 Consideration transferred = $800,000 Goodwill = $64,000 Net assets of Malone on 31 October 2012: Share capital

Revaluation reserve Opening retained earnings (117/12) Dividend declared 30,000 Closing retained earnings (31110/12) Total net assets (31/10/12) Net assets Tyson acquired @ 80% $380,000 $500,000 339,000 profit (1 ,’7/12-31/10/12) (20,000) $390,000 $983,200 Proceeds from disposal of investment in Malone Less: Dividend declared @ 80% ($16,000) (999,200) Net assets Tyson Gain on sale of acquired investment (Inc. Goodwill) (64,000) goodwill) ($983,200) $100,800 Less: Goodwill Gain on sale of investment (ex.

36,800 so, Brenna share at = $22,080, ND INC share at = $14,720 Disclosure SAAB 12 Disclosure of Interests in Other Entities (paragraph 19), an entity require disclosing the gain or loss calculated in accordance with paragraph 25 of CASABA, and: (a) The portion of that gain and loss attributable to measuring any investment retained in the former subsidiary at its fair value at the date when control is lost; (b) The line items in profit and loss in which the gain or loss is recognized. Requirement for disclosure gain on sale of investment in Malone (a) Brenna should closure part of gain on sale of investment in Malone, 60% gain on sales should contribute to Brakeman’s group. (b) INC of gain on sale of Tyson is not recognized in Brakeman’s group. Conclusions On consolidation, Brakeman’s balance sheet will not include Melon’s assets and liabilities after 30 October 2012. Therefore, there is dereferencing Melon’s assets and Liability.

Initial recognized goodwill should be written off from the consolidation. Brenna should dereliction assets and Liabilities of Malone after loss of control, including goodwill.