Page 278 - Microsoft Word - 00 IWB ACCA F7.docx

Chapter 21

Consolidated financial statements

7.1 Impact on interpretation for individual entity within a group

 Intra-group transactions

– Distorted margins due to transfer pricing policy

– Low-rate finance available from parent

 Group assets made available at subsidised rates

 Group purchasing deals available

 Intra-group arrangements distort working capital ratios

7.2 Impact on interpretation for consolidated financial statements

 Likely to involve acquisition or disposal during year

– One year with subsidiary, one without

 Need to identify impact of addition or disposal on trading performance

– From date of acquisition for newly-acquired subsidiary

– To date of disposal for disposed subsidiary

 Need to identify impact of subsidiary on statement of financial position

Take care with mid-year acquisitions or disposals to include only that
proportion of the subsidiary’s performance that should be included.

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