HA2032 - Corporate and Financial Accounting - Legislative Requirements - Assessment Answer

 Subject Code: HA2032  Internal Code: E_AI_EJJG_CBI

Corporate and Financial Accounting - Legislative Requirements - Assessment Answer

Assignment Task: Part A  You are a non-executive director attending a regular board meeting for JKY Ltd. At the top of the agenda is the proposed takeover of a smaller company called FAB Ltd, which is an ASX listed entity operating in the same industry. JKY Ltd is considering which acquisition strategy should be used. One the director is arguing that the direct “purchase/acquisition method” is the best option, whilst another a director is proposing a longer-term strategy, which involves acquiring the shares of FAB Ltd by first acquiring “significant influence” over FAB Ltd. Given your experience as a qualified CPA, the Chairman has asked you for your opinion in writing based on your extensive knowledge of accounting for business combinations. Part B At the same board meeting, the CFO reported that a partially owned subsidiary provided professional services and sold inventory to the parent company JKY Ltd at a profit. The CFO is seeking clarification from the board in relation to whether profit should be deducted from the subsidiary’s reported profit for the sale of inventory and for providing the professional services to the parent entity. Secondly, how will this affect the non-controlling Interest (NCI) calculation in the subsidiary’s annual profit? Part C  You are now finalizing the consolidated financial statements in the annual report for JKY Ltd as at 30 June 20X8. AASB 127 requires that the NCI is reported as a separate item of owner’s equity. As part of the preparation, you must also consider the allocation of other comprehensive profit to the NCI. The Financial Accountant responsible for the subsidiary has already informed you that the assets of the subsidiary were recorded at historical cost at the control date. Intangible Assets Impairment of Assets Property, Plant and Equipment Fair Value Measurement Consolidated Financial Statements Business Combinations

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