DipIFR Syllabus D. Preparation of external financial reports - Equity Table - Notes ^{6 / 14}

S’s Equity Table

As you will see when we get on to doing bigger questions, this is always our first working. 

This is because it helps all the other workings.
 
Remember that Equity = Net assets

Equity is made up of:

1. Share Capital

2. Share Premium

3. Retained Earnings

4. Revaluation Reserve

5. Any other ‘reserve’!

If any of the above is mentioned in the question for S, then they must go into this equity table working.

What does the table look like?

Remember that any other reserve would also go in here.

So how do we fill in this table?

1. Enter the "Year end" figures straight from the SFP

2. Enter the "At acquisition" figures from looking at the information given normally in note 1 of the question. 

   Please note you can presume the share capital and share premium is the same as the year-end figures, so you're only looking for the at acquisition reserves figures

3. Enter "Post Acquisition" figures simply by taking away the "At acquisition" figures away from the "Year end" figures 

   (ie. Y/E - Acquisition = Post acquisition)

So let's try a simple example.. (although this is given in a different format to the actual exam let's do it this way to start with).

A company has share capital of 200, share premium of 100 and total reserves at acquisition of 100 at acquisition and have made profits since of 400. There have been no issues of shares since acquisition and no dividends paid out.

Show the Equity table to calculate the net assets now at the year end, at acquisition and post-acquisition

Solution

Fair Value Adjustments

Ok the next step is to also place into the Equity table any Fair Value adjustments
 
When a subsidiary is purchased - it is purchased at FAIR VALUE at acquisition.
 
Using the figures above, if I were to tell you that the FV of the sub at acquisition was 480. 

Hopefully you can see we would need to make an adjustment of 80 (let’s say that this was because Land had a FV 80 higher than in the books):

Now as land doesn’t depreciate - it would still now be at 80 - so the table changes to this:

If instead the FV adjustment was due to PPE with a 10 year useful economic life left - and lets say acquisition was 2 years ago, the table would look like this:

The -16 in the post acquisition column is the depreciation on the FV adjustment. (80 / 10 years x 2 years).

This makes the now column 64 (80 at acquisition - 16 depreciation post acquisition).