CAT / FIA FFA Syllabus G. Preparing Simple Consolidated Financial Statements - Consolidated statement of comprehensive income. - Notes ^{11 / 11}

Basic principles

From sales revenue to profit after tax, include all of P’s income and expenses plus all of S’s income and expenses (where a mid-year acquisition has occurred, these must be time-apportioned).
Once the profit after tax is calculated, deduct share profits due to the non-controlling interest.

Non-controlling interest

This is calculated as: NCI% x subsidiary’s profit after tax (taken from S’s column of consolidation schedule).

Dividends

A payment of a dividend by S to P must be cancelled. Any dividend income shown in the consolidated statement of profit or loss must arise from investments other than those in subsidiaries or associates.

Unrealised Profits

The adjustment to unrealised profit should be shown as an increase to cost of sales. It affects the books of the SELLER.

Sales and Purchases

Intra-group trading must be eliminated from the consolidated statement of profit or loss.

Consolidated sales revenue = P’s revenue + S’s revenue – intra-group sales

Consolidated cost of sales = P’s COS + S’s COS – intra-group sales

Interest on loan

If loans are outstanding between group companies, intra-group loan interest will be paid and received. Both the loan and loan interest must be excluded from the consolidated results.

Transfers of non-current assets

If one group company sells a non-current asset to another group company, the following adjustments are needed in the statement of profit or loss

Any profit or loss arising on the transfer must be deducted
The depreciation charge must be adjusted so that it is based on the cost of the asset to the group

Mid-year acquisitions

If a subsidiary is acquired part way through the year, then it is important to time apportion the results of S in the year of acquisition. Unless indicated otherwise, assume that revenue and expenses accrue evenly.

Other Comprehensive Income

The consolidated statement of comprehensive income is produced using the consolidated statement of profit or loss as a basis. Remember that in F3/FFA, the only item of other comprehensive income you may have is the revaluation of PPE. This is shared between the owners of the parent and NCI according to the percentage of their investment.