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Requirement
1- Write a report on a Corporate Financial Accountingin about 2500 words .
Solution
Introduction
Accounting standards could be said as the basis of recodingtransactions. This paper will analyse the three financial events. Under the first part, it will analyse the merger and acquisition techniques that will best suit the business. The second part will cover the intragroup transactions. It will also discuss how profit is allocated un the financial statements. Part c will focus on om the NCI disclosure requirements. The issues raised in the consolidating process will be covered in this part. This will be done in context with the JKY ltd who is going to acquire FAB limited. There will be a summary of the enduring task that will provide oh the overview of the task done so far.
Part a response
JKY has decided to acquire FAB ltd which operates in the same industry. There are two ways acquire the FAB ltd served by the directors under the board meeting, the first one is the purchase or acquisition method, the second one is the first acquiring the significant influence over the FAB ltd. The first one is the most popular method of acquisition. It helps the company t reflect the data of both the companies precisely (Kiesoet al. 2016).
After making the above analysis it could be said that the purchase or acquisition method would beused by the company. It will help the company to claim the tax benefits. On the other hand, this consolidation method of accounting would help the company in merging the financial statement with the subsidiary company. This will also help increase the goodwill of the company. It all about the investment that differs the method of acquisition. This will also increase the profit of the company. there will be true and fair reporting if both the subsidiary and the parent company. This will help the company in the long run. The going concern concept for the businesses will be maintained. There is best practice associated with this accounting method of the acquisition. It will help the company in presenting the financial statements properly (Capelle-Blancard and Havrylchyk, 2016). This will help in proper financial reporting for the company. This would be possible because the economical statement of the parent business will be presented with FAB ltd. Therefore, all the financial information of the companies with proper segments will bepresented in the economical statement of company.It is the major best practice of the companies under financial reporting. This will help the JKY ltd to acquire the benefits if the pre-acquisition and post-acquisition. Therefore, it will bring the utmost advantage to companies. Therefore, the purchase/ acquisition method will be best-suited for the JKY ltd.
It could be seen from the above example that financial items of both the companies in the same balance sheet, the equities and liabilities for the companies reflect according to their respective proportion. This will help the stakeholders to identify the performance of the parent company solely. This will allow the company to delivers the exact information about both the companies separately. It is widely used techniques and found to be best by the business tycoons. There is a significant impact on the reads of the financial report if the company. separate and clearreporting helps the companies in maintaining the trust of the people in financial reporting if the company (Bargigliet al. 2015). IFRS also prefers the proportional consolidation method. It more especially reflects the economic scope of the company operation. Therefore, the purchase/ acquisition method could be used by the company.
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Part b response
Under the intragroup transaction, AASB 127 implies that the investment made by the parent or the subsidiary company need to be accounted on the foundation of "direct equity interest". This need not be reported on the foundation of reported results. It could be shown as the net asset possessed by the investees. Under the given case FAB ltd. I have made some investment in the JKY ltd. This needs to be recorded as the direct interest it needs to be reported for the FAB ltd as a separate asset. Again, there is a question of the treatment of the profit. It will be shown separately for the fab ltd. This will be treated as a common interest for both companies (Fan et al. 2016). There will be profit made by the associate. This will help the company to show the transactions of the investment by the subsidiary company with full disclosure.The professional service provided by the subsidiary company to the parent company will not have a separate recording in the economical statement of company. [Referred to appendix 1]
Further, the treatment of profit made by the subsidiary company in the NCI is analysed. This is an important part of the treatment of the profit in the consolidated accounts. Intragroup b transactionshaveto follow certain rules for the led transactions. These rules are set up at the time of the final reconciliation. It is executed at the time of the financial reconciliation process for the firms. It is used to dine in line with the givenobligations:
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Differences in accounting period- There could be different dares fur the closure of the financial year by the companies. it is necessary to make the reconciliation process alive. This will help to manage the transaction of the company occurring on different dares. It would help the companies to focus on several aspects of changes in the accounting consideration by both the companies. Close dates could be responsible for the big accounting march every year (Cummins et al. 2015). Again, the subsidiary company closes its books of accounts on 31stDecember.Therefore, it is vital to focus on the closure dates of the companies.
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Discrepancies in the cut off dates- There could be discrepancies in the dare if cut off. It would help the companies to mitigate the discrepancy in the accounting procedures of the commonalities. Therefore, it is necessary to employ this during the consolidation of the financial statement.This will help to avoid the discrepancies arising out of the accounting procedures if the company (Anagnostopoulou and Tsekrekos, 2015).
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Security market- Before the consolidation both the companies were having a different area if operation. The must be dealing with different securities with different instruments also. This will help the companies in managing the earnings made by the securities market. This if not could be a major problem while making the financial statement. Therefore, reconciliation is required for companies. It will help to make the sources of the company precisely. There are proper rules set for the accounting bodies for the treatment of this transaction undertaken by the companies (Dai and Vasarhelyi, 2016). This could be followed for clearly recording the transactions.
The other reason for the assessment of the non-controlling interest is that it helps to manage the proprietorship interest od all the companies. It is helping the companies in analyzed the effect of each and every transaction on the financial reports of the company. under the above table, the calculation for the non-controlling interest has been shown. It has helped to reflect the profit earned by the company in several years. The above table reflects the calculation of noncontrolling interest (Chan and Cheung, 2016). The noncontrolling interest has been estimated as5325. this is being assessed on the basis of the ownership stake which was 85%. There could be an easy classification of the assets and incomes of the companies. Companies include both kinds of companies which includes parent and subsidiary company. There is a special effect of this transaction on the financial statements of the company. It helps to measure the accurate interest that could be uncontrolled by the business.
Part c response
At the time of finalizing the consolidated financial statement, it needs to be assured that all the transactions are being made according to the financial disclosures. This is required by the business to make the true and fairreporting of the financialtransactions. Accounting standard 103 is responsible for making this change. The changes that are required to be made at the time of the consolidation are:
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Fair value- this means at the date of finalizing the consolidated accounts it needs to be assured that all the transactions of the parent nod the subsidiary company are showing the fair value. It is necessary fir the business to reflect the true and fair image of the financial items in the economical statement of the company. It will help the companies to gain the advantage of the fair e(Martins et al. 2017).Investors and other stakeholders are going to be benefitted by this activity, the measurement if the NCI would help the to the composition of contribution if the companies. It is a major practice that is made mandatory by the AS 12. This is helps to maintain the understandability of the economical statement presented by the companies. Financial transactions especially the amount of profit could be easily understandable in each case of companies. It is important to male the annual report understandable by each and every major and minor stakeholders. Therefore, this could be best practice for the companies.
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Holders proportionate- the controlling interest acquired by the company in regards with the goodwill, purchase need to be in relation to the NCI. It needs to be clearly shown in the business financial statements. Profits that need to be added to the comprehensive financial statements. The company can add profit to the owners every fund. This is because it holds the maximum percentage of the subsidiary company. However, there are no chances of showing NCI when the shareholders own a percentage of less than 50 percent. There is no ownership right and hence there will the same voting rights available for the shareholders (Surduet al. 2018). Therefore, in the case when a company holds less than 50 percent of the shares in subsidiary NCI could not be reported as an owner equity fund.Thus, to report the NCI in the financial statements of the company. There is a consolidated account for the companies, therefore it becomes necessary for the companies to focus on each financial item of the company.[Referred to appendix 2]
The disclosure requirement in the annual report will be changed by the true and fair reporting under the consolidated accounts. It will help the company to focus on several aspects of the disclosure requirements made by the accounting standard board. Other than this it is important for the financial statement to be reliable. Quality is the major requirement in the annual reports of the company. It isa practice if providing the appropriate information to the stakeholders if the company. Readers of the annual reports will find this faithful and reliable. This could be done by the parent company to make theirreporting mire sound. (Poczter, 2018). It is important to provide relevant information because stakeholders of the company used to take necessary decision on the basis of the information served by the companies. Therefore,there are accounting bodies which measures the performance of the companies. They used to issue guidelines for the making and reporting of the financial information among the interest holders of the company. Major after the acquisition process. This is because there are big data available for the companies. It creates a more mass data to be recognized and presented in front if the interest holders. NCI is one if the major part after the acquisition. Goodwill and profit are major elements that are required by the NCI. This is are the foundation of the presentation of the economic statements in the monetary report of any particular period. the disclosures if the NCI in the financial report of the business will give strengthtodetermine the interest of the minor companies in the subsidiary company, threw are possible chances of getting clear about the function of each company in the economicperformance of the company. It is beingdetermined on the basis of the ownership stake. The role of both the companies in the financialperformance of that particular year could b be determined by this process. Thus, it is required for the companiesto disclose the financial statement with the NCI in case of any acquisitions made by the company. It will help in determining the exact financial position with an appropriate source. (Legislation, 2019)
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Thus, it could be concluded that the purchase and acquisition method for the company will be more suitable. It will help the company in determining the exact financial piston for the companies. There will be different circumstances of reporting the NCI in the financial report. It will help to show the exact and fair value if the accounting transactions made by the company. there are several activities that could help the company in making the financial statements more reflective. NCI is one of that method on which the stakeholders of the company could rely on. This is an effective way to report the transaction of both parent and subsidiary company.
Reference list
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Book
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Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2016. Intermediate Accounting, Binder Ready Version. US: John Wiley & Sons.
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Journals
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Anagnostopoulou, S.C. and Tsekrekos, A.E., 2015. Earnings management in firms seeking to be acquired. The British Accounting Review, 47(4), pp.351-375.
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Ang, A.E., Masulis, R.W., Pham, P.K. and Zein, J., 2018. Internal capital markets in family business groups during the global financial crisis. UNSW Business School Research Paper Forthcoming, 24, pp.69-80.
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August, D.I., Vachharajani, N. and Bridges, M.J., Parakinetics Inc., 2015. System and method for supporting multi-threaded transactions. U.S. Patent 9,128,750.
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Bargigli, L., Di Iasio, G., Infante, L., Lillo, F. and Pierobon, F., 2015. The multiplex structure of interbank networks. Quantitative Finance, 15(4), pp.673-691.
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Capelle-Blancard, G. and Havrylchyk, O., 2016. The impact of the French securities transaction tax on market liquidity and volatility. International Review of Financial Analysis, 47, pp.166-178.
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Chan, A.W. and Cheung, H.Y., 2016. Extraversion, individualism and M&A activities. International Business Review, 25(1), pp.356-369.
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Cummins, J.D., Klumpes, P. and Weiss, M.A., 2015. Mergers and acquisitions in the global insurance industry: valuation effects. The Geneva Papers on Risk and Insurance-Issues and Practice, 40(3), pp.444-473.
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Dai, J. and Vasarhelyi, M.A., 2016. Imagineering Audit 4.0. Journal of Emerging Technologies in Accounting, 13(1), pp.1-15.
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Fan, J.P., Jin, L. and Zheng, G., 2016. Revisiting the bright and dark sides of capital flows in business groups. Journal of business ethics, 134(4), pp.509-528.
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Online articles
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Martins, G.S., Rossoni, L., Duarte, A.L. and Martins, R.S., 2017. Supply chain relationships: Exploring the effects of both relational and structural embeddedness on operational performance. International Journal of Procurement Management, 10(5), pp.639-664.
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Poczter, S., 2018. Business Groups In Emerging Markets: A Survey And Analysis. Emerging Markets Finance and Trade, 54(5), pp.1150-1182.
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Surdu, I., Mellahi, K. and Glaister, K., 2018. Emerging market multinationals’ international equity-based entry mode strategies: Review of theoretical foundations and future directions. International Marketing Review, 35(2), pp.342-359.
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Website
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Legislation, (2019), AASB 128 Investments in Associates, available at: https://www.legislation.gov.au/Latest/F2018C00324, [accessed on 18.05.2019]
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