Details of Assignment
:
You are required to form a team (group) of 3 to 4 m
embers. Let your lecturer
know the names of your team members. Select a set o
f financial statements for a
group of companies and obtain approval from your le
cturer for the group of
companies that you have selected. Please note that
two teams may not work on
the same group of companies so if another team has
already registered their
interest in the particular group of companies you w
ill be requested to select a
different group of companies.
Read the annual report including the financial stat
ements of the group and write a
memorandum to the board of directors clearly explai
ning some of the technical
aspects of consolidation. Make sure that you draw o
n the group’s specific details
to explain the intricacies of consolidation to the
board, and as much as possible
avoid answering in general terms. Some of the aspec
ts that you need to cover as
a team are (but not restricted to):
1. The composition of the group; namely the subsidi
aries, associates, any joint
ventures and any other significant investments
2. Why did the parent entity have to prepare consol
idated financial statements
when the subsidiary company is a separate legal ent
ity in its own right?
3. How is the group of companies funded? Share capi
tal, debentures? Any
options, bonus issues etc. Who owns the group?
4. Does the published set of group financial statem
ents reveal the company’s
policy on corporate governance? Audit committees? S
ustainability? Solvency?
Where and why?
5. The non controlling interest – where would you f
ind it in the financial
statements and what does it represent? Details of a
ny direct and indirect non
controlling interest?
6. Has there been any goodwill on acquisition? Or a
ny gain on bargain
purchase? Where would you find it in the financial
statements and what does it
mean? Any impairment?
7. Does the group have any foreign currency transac
tions? Any foreign
subsidiary companies? How have they been accounted
for in the financial
statements?
8. Any other relevant matter that you may wish the
board of directors to make
note of in respect of some transaction or event, ba
lance of account or
disclosure that will assist them in understanding t
he financial statements of the
group.