Advanced Accounting | Revision Video | AS 21 | Part 01

Created from Youtube video: https://www.youtube.com/watch?v=r-XoJ3xfjGkvideo

Concepts covered:Accounting Standard 21, consolidation, parent company, goodwill, net assets

The video discusses Accounting Standard 21, which deals with the consolidation of financial statements by a parent or holding company. It explains the principles of consolidation, including the calculation of goodwill and capital reserve, and the importance of showing consolidated net assets to reflect the true control over resources, as mandated by law.

Table of Contents1.Understanding Consolidation in Accounting Standard 21 2.Understanding Cost of Control and Consolidation Principles 3.Accounting for Net Assets and Minority Interest in Parent-Subsidiary Relationships

chapter

Understanding Consolidation in Accounting Standard 21

Concepts covered:Accounting Standard 21, consolidation, parent company, voting power, financial statements

Accounting Standard 21 deals with the consolidation of financial statements by a parent company, also known as a holding company, which has control over another entity. Consolidation is required when the parent has more than 50% voting power or the power to compose the governing body, ensuring users understand the total assets controlled by the parent, including those of subsidiaries.

Question 1

Does AS 21 deal with consolidation of financial statements?

Question 2

Who consolidates financial statements?

Question 3

Consolidation is required when there is more than 50% _____ power.

Question 4

CASE STUDY: A company claims it has no assets, but controls assets worth millions through a subsidiary. They are questioned about their financial transparency.

What should the company do next?

Question 5

CASE STUDY: A parent company controls 60% of a subsidiary's voting power. The parent company is preparing its financial statements and needs to decide which statements to consolidate.

Which statements should the parent company consolidate?

Question 6

Is a parent company also known as a holding company?

Question 7

Who mandates financial consolidation?

Question 8

Accounting Standard 21 deals with the consolidation of _____ statements.

Question 9

CASE STUDY: A parent company is unsure if it should consolidate financial statements due to having only 51% voting power in a subsidiary.

Should the parent company consolidate?

Question 10

CASE STUDY: A holding company has the power to appoint the governing body of another entity without holding shares. They are preparing their financial reports.

What should the holding company consolidate?

Question 11

Is consolidation mandated by law?

Question 12

What indicates control in consolidation?

Question 13

The law mandates _____ of financial statements for transparency.

Question 14

Does AS 21 cover associates and joint ventures?

Question 15

Why is consolidation necessary?

Question 16

The parent company is also known as the _____ company.

Question 17

Is consolidation required with more than 50% voting power?

Question 18

The reason for consolidation is because the parent has control over _____ of the subsidiary.

chapter

Understanding Cost of Control and Consolidation Principles

Concepts covered:Cost of Control, Goodwill Calculation, Minority Interest, Consolidation, Net Assets

The chapter discusses the concept of 'Cost of Control' as an alternative term for goodwill calculation in financial accounting. It also explains the importance of consolidating 100% of net assets in a subsidiary, even if the parent company does not own 100% of the capital, due to the principle that control is either full or non-existent.

Question 19

Cost of control is synonymous with goodwill calculation.

Question 20

What is the principle of consolidating net assets?

Question 21

The calculation of goodwill is also known as the calculation of _____.

Question 22

CASE STUDY: After acquiring a subsidiary, a parent company records profits from the subsidiary's earnings. They need to understand the implications of this consolidation.

What does consolidation of earnings imply?

Question 23

Minority interest is also called non-controlling interest.

Question 24

What is an alternative name for Goodwill?

Question 25

We consolidate 100% net assets even without owning 100% _____.

Question 26

CASE STUDY: A company acquires 60% of another company's shares. They need to calculate the goodwill or capital reserve on the date of obtaining control.

What is calculated on the acquisition date?

Question 27

100% net assets are consolidated even without full capital ownership.

Question 28

What is the new term for Minority Interest?

Question 29

After acquisition, the parent will have a share in the subsidiary's _____.

Question 30

Goodwill is calculated on the date of obtaining control.

Question 31

What results from owning less than 100% capital?

Question 32

The birth of minority interest occurs when 100% is written as _____.

Question 33

Parent shares in subsidiary's earnings post-acquisition.

Question 34

When do you calculate Goodwill or Capital Reserve?

chapter

Accounting for Net Assets and Minority Interest in Parent-Subsidiary Relationships

Concepts covered:net assets, minority interest, parent-subsidiary, goodwill, capital reserve

The chapter discusses the accounting treatment of net assets and minority interest in the context of a parent-subsidiary relationship. It emphasizes the importance of presentation over crude concepts and explains how goodwill and capital reserve are calculated during acquisition, highlighting that minority interest disappears in wholly-owned subsidiaries.

Question 35

Do net assets include subsidiary's assets and liabilities?

Question 36

What happens to share capital after acquisition entries?

Question 37

Presentation is preferred over _____ concepts in financial reporting.

Question 38

CASE STUDY: A company acquires 100% of a subsidiary. They need to adjust their financial statements accordingly.

What should be excluded from the parent's P&L?

Question 39

CASE STUDY: A business reviews entries post-acquisition to ensure accurate financial reporting.

Select three correct entries post-acquisition.

Question 40

Is minority interest absent in wholly owned subsidiary?

Question 41

What is the result of 100% net asset acquisition?

Question 42

In a wholly owned subsidiary, the _____ interest disappears.

Question 43

CASE STUDY: A firm is preparing a presentation for stakeholders after acquiring a subsidiary.

What should the presentation focus on?

Question 44

Is goodwill the difference in acquisition entries?

Question 45

What is required for effective financial presentation?

Question 46

Net assets include assets and liabilities of the _____.

Question 47

Does share capital change with these two entries?

Question 48

What happens to minority interest in wholly-owned subsidiaries?

Question 49

The difference in acquisition is called _____ or capital reserve.

Question 50

Are these entries based on crude concepts?

Question 51

How does acquisition affect net assets of a subsidiary?

Question 52

On acquisition date, _____ interest not owned by parents is recognized.

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