Page 23 - CIMA May 18 - MCS Day Tasks

Chapter 10

ADVANCED FINANCIAL REPORTING

(F2) PRACTICE TASKS

TASK 1 – GROUP ACCOUNTING ISSUES

Trigger and task
You receive the following email

From: Michela Luane (Director of Operations ‐ Central Eurozone)

To: Financial Manager

Subject: Group accounting issues

As you are aware, Robert’s Whiteford’s expertise is to ensure that the bus fleet is mechanically
sound and fit for use, rather than dealing with the detail of financial issues. I had a meeting with
Robert yesterday afternoon and he asked me a number of questions about financial reporting. I
was able to deal with most of them, but there is something on which I’d like your input.

Robert understands the basic principle that the consolidated financial statements aggregate the
financial statements of all subsidiaries under the control of Menta. He is aware that there are
other accounting terms relevant to investments in other entities and he is keen to ensure that he
understands those terms, particularly as Menta may make additional investments in other entities
in the foreseeable future. He is unsure of how ‘control’ and ‘goodwill’ are defined and their
impact upon how consolidated financial statements are prepared and presented.

In addition, from reviewing the financial statements of other companies, Robert is also aware of
other terminology relating to consolidated accounts: ‘non‐controlling interest’, ‘associate’ and
‘joint arrangement’.

Please draft some explanatory notes that I can forward to Robert that will:

 define and explain the terms Robert asked about, and
 explain how they would be included in consolidated financial statements.

Michela

Prepare a response to Michela’s request (45 minutes)

KAPLAN PUBLISHING 39