9Theconsolidatedstatementofprofitorlossand.docx

9Theconsolidatedstatementofprofitorlossand.docx

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9Theconsolidatedstatementofprofitorlossand

TheConsolidatedstatementofprofitorlossandothercomprehensiveincome

1Theconsolidatedstatementofprofitorloss

Thesourceoftheconsolidatedstatementofprofitorlossistheindividualstatementsofprofitorlossoftheseparatecompaniesinthegroup.

Intheconsolidatedstatementofprofitorlossnon-controllinginterestisbroughtinasaone-lineadjustmentattheendofthestatement.

Simpleexample:

Consolidatedstatementofprofitorloss

PCoacquired75%oftheordinarysharesofSCoonthatcompany’sincorporationin20*3.Thesummarizedstatementsofprofitorlossandmovementonretainedearningsofthetwocompaniesfortheyearending31December20*6aresetoutbelow.

Required

Preparetheconsolidatedstatementofprofitorlossandextractfromthestatementofchangesinequityshowingretainedearningsandnon-controllinginterest.

PINGCO

PONGCO

$

$

Salesrevenue

75,000

38,000

Costofsales

（30,000）

（20,000）

Grossprofit

45,000

18,000

Administrativeexpenses

（14,000）

（8,000）

Profitbeforetax

31,000

10,000

Incometaxexpense

（10,000）

（2,000）

Profitfortheyear

21,000

8,000

Note:

Movementonretainedearnins

Retainedearningsbroughtforward

87,000

17,000

Profitfortheyear

21,000

8,000

Retainedearningscarriedforward

108,000

25,000

Solution

PCO

CONSOLIDATEDSTATEMENTOFPROFITORLOSSFORTHEYEARENDED31DECEMBER20*6

$

Salesrevenue（75+38）

113,000

Costofsales（30+20）

（50,000）

Grossprofit

63,000

Administrativeexpenses（14+8）

（22,000）

Profitbeforetax

41,000

Incometaxexpense

（12,000）

Profitfortheyear

29,000

Profitattributableto:

27,000

Ownersoftheparent

2,000

Non-controllinginterest（$8000*25%）

29,000

STATEMENTOFCHANGESINEQUITY（EXTRACT）

RetainedEarnings

Non-controllingInterest

TotalEquity

Balanceat1January20*6

99,750

4,250

104,000

Totalcomprehensiveincomefortheyear

27,000

2,000

29,000

Balanceat31December20*6

126,750

6,250

133,000

Noticehowthenon-controllinginterestisdealtwith

（a）Downtotheline‘profitfortheyear’thewholeofSCo’sresultsisincludedwithoutreferencetogroupshareornon-controllingshare.Aone-lineadjustmentistheninsertedtodeductthenon-controllingshareofSCo’sprofit.

（b）Thenon-controllingshare（$4250）ofSCo’sretainedearningsbroughtforward（17000*25%）isexcludedfromgroupretainedearnings.Thismeansthatthecarriedforwardfigureof$126750isthefigurewhichwouldappearinthestatementoffinancialpositionforgroupretainedearnings.

Thislastpointmaybeclearerifweconstructtheworkingforgroupretainedearnings

PCo

SCo

$

$

Atyearend

108,000

25,000

Lesspre-acquisitionretainedearnings

0

25,000

SCo-shareofpostacquisitionretainedearnings（25000*75%）

18,750

126,750

Thenon-controllingshareofSCo’sretainedearningscomprisesthenon-controllinginterestinthe$17000profitsbroughtforwardplusthenon-controllinginterest（$2000）in$8000retainedprofitfortheyear.

Wewillnowlookatthecomplicationsintroducedbyintra-grouptrading,intra-groupdividendsandpre-acquisitionprofitsinthesubsidiary.

1.1Intra-grouptrading

Intra-groupsalesandpurchasesareeliminatedfromtheconsolidatedstatementofprofitorloss

Theconsolidatedfiguresforsalesrevenueandcostofsalesshouldrepresentsalesto,andpurchasesfrom,outsiders.Anadjustmentisthereforenecessarytoreducethesalesrevenueandcostofsalesfiguresbythevalueofintra-groupsalesduringtheyear.

Wehavealsoseeninanearlierchapterthatanyunrealizedprofitsonintra-grouptradingshouldbeexcludedfromthefigureforgroupprofits.Thiswilloccurwhenevergoodssoldataprofitwithinthegroupremainintheinventoryofthepurchasingcompanyattheyearend.Thebestwaytodealwiththisistocalculatetheunrealizedprofitonunsoldinventoriesattheyearendandreduceconsolidatedgrossprofitbythisamount.Costofsaleswillbethebalancingfigure.

SupposeinourearlierexamplethatSCohadrecordedsalesof$5000toPCoduring20*6.SCohadpurchasedthesegoodsfromoutsidesuppliersatacostof$3000.OnehalfofthegoodsremainedinPCo’sinventoryat31December20*6

Preparetherevisedconsolidatedstatementofprofitorloss

Solution

Theconsolidatedstatementofprofitorlossfortheyearended31December20*6wouldnowbeasfollows.

$

Salesrevenue（75+38-5）

108,000

Costofsales（30+20-5+1*）

（46,000）

Grossprofit（45+18-1*）

62,000

Administrativeexpenses

（22,000）

Profitbeforetaxation

40,000

Incometaxexpense

（12,000）

Profitfortheyear

28,000

Profitattributableto:

Ownersoftheparent

26,250

Non-controllinginterest（$8000-1000）*25%）

1,750