Corporate Accounting Case Study
Disposal of Investment in Malone Limited
Background of Investment in Malone
• On 1 July 2011, Dyson purchased 80% of the shares on Malone for $ 800,000.
• On 30 June 2012, the land was revalued to $ 870,000.
• On 30 June 2012, Brennan owned 100% of Dyson, there has been changed to 60% of Dyson in the next year.
• Dividend of $ 20,000 was declared on 15 October 2012, and been paid on 15 November 2013.
• On 31 October 2012, Dyson sold the entire interest for $1.1 million.
• Partial goodwill method is used in Malone.
Theory and Impact of Accounting Treatment
• AASB 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
Brennan 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 Brennan.
(b) Any other different profit and loss should be recognized in Brennan Group.
• AASB 10 Paragraph B98
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
Brennan 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.
(a) Malone’s assets and liabilities at their carrying amounts;
(b) Malone’s NCI at the date when control is lost.
Accounting treatments for loss of control
As the requirements in AASB 10 paragraph B97 - B99, we should do the following calculation:
Acquisition analysis: Dyson-Malone
Net fair value of identifiable assets and liabilities of Malone
Background of Investment in Malone
• On 1 July 2011, Dyson purchased 80% of the shares on Malone for $ 800,000.
• On 30 June 2012, the land was revalued to $ 870,000.
• On 30 June 2012, Brennan owned 100% of Dyson, there has been changed to 60% of Dyson in the next year.
• Dividend of $ 20,000 was declared on 15 October 2012, and been paid on 15 November 2013.
• On 31 October 2012, Dyson sold the entire interest for $1.1 million.
• Partial goodwill method is used in Malone.
Theory and Impact of Accounting Treatment
• AASB 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
Brennan 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 Brennan.
(b) Any other different profit and loss should be recognized in Brennan Group.
• AASB 10 Paragraph B98
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
Brennan 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.
(a) Malone’s assets and liabilities at their carrying amounts;
(b) Malone’s NCI at the date when control is lost.
Accounting treatments for loss of control
As the requirements in AASB 10 paragraph B97 - B99, we should do the following calculation:
Acquisition analysis: Dyson-Malone
Net fair value of identifiable assets and liabilities of Malone