ACCA FR Syllabus C. Analysing And Interpreting The Financial Statements - Consolidated Financial Statements Might Limit Interpretation - Notes ^{4 / 4}

Problems include:

1. Income statement includes only half the returns (if mid-year acq)

   But the SFP includes all the assets (capital employed)

   Thus distorting ROCE

2. Synergies can take a while to come in and so return is artificially low

3. Subs are acquired at FV

   This generally increases asset values

   Meaning a deterioration in ROCE and Asset Turnover

4. Goodwill is now recognised whereas before it wasn't