DipIFR Syllabus D. Preparation of external financial reports - Group Income Statement - Notes ^{13 / 14}

Rule 1 - Add Across 100%

Like with the SFP, P and S are both added together. 

All the items from revenue down to Profit after tax; 

Except for:

1) Dividends from Subsidiaries
2) Dividends from Associates

Rule 2 - NCI

This is an extra line added into the consolidated income statement at the end. 

It is calculated as NCI% x S’s PAT.

The reason for this is because we add across all of S (see rule 1) even if we only own 80% of S. 

We therefore owe NCI 20% of this which we show at the bottom of the income statement.

Rule 3 - Associates

Simply show one line (so never add across an associate). 

The line is called “Share in Associates’ Profit after tax”.

Rule 4 - Depreciation from the Equity table working

Remember this working from when we looked at group SFP’s?

The -10 from the FV adjustment is a group adjustment. So needs to be altered on the group income statement. It represents depreciation, so simply put it to admin expenses (or wherever the examiner tells you), be careful though to only put in THE CURRENT YEAR depreciation charge.

Rule 5 - Time Apportioning

This isn’t difficult but can be awkward/tricky. Basically all you need to remember is the group only shows POST -ACQUISITION profits. i.e. Profits made SINCE we bought the sub or associate.

If the sub or associate was bought many years ago this is not a problem in this year’s income statement as it has been a sub or assoc. all year.

The problem arises when we acquire the sub or the associate mid year. Just remember to only add across profits made after acquisition. The same applies to NCI (as after all this just a share of S’s PAT). 

For example if our year end is 31/12 and we buy the sub or assoc. on 31/3. We only add across 9/12 of the subs figures and NCI is % x S’s PAT x 9/12.

One final point to remember here is adjustments such as unrealised profits / depreciation on FV adjustments are entirely post - acquisition and so are NEVER time apportioned.

Rule 6 - Unrealised Profit

You will remember this table I hope

Well the idea stays the same - it’s just how we alter the accounts that changes, because this is an income statement after all and not an SFP. So the table you need to remember becomes:

Notice how we do not need to make an adjustment to reduce the value of inventory. This is because we have increased cost of sales (to reduce profits), but we do this by actually reducing the value of the closing stock.