Contents
This report is based on the following requirement - - Select a set of financial statements for a group of companies.
- Read the annual report including the financial statements of the group and write a memorandum to the board of directors clearly explaining some of the technical aspects of consolidation. Make sure that you draw on 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 aspects that you need to cover as a team are (but not restricted to):
- 1. The composition of the group; namely the subsidiaries, associates, any joint ventures
- and any other significant investments
- 2. Why did the parent entity have to prepare consolidated financial statements when the subsidiary company is a separate legal entity in its own right?
- 3. How is the group of companies funded? Share capital, debentures? Any options, bonus issues etc. Who owns the group?
- 4. Does the published set of group financial statements reveal the company’s policy on corporate governance? Audit committees? Sustainability? Solvency? Where and why?
- 5. The non controlling interest – where would you find it in the financial statements and what does it represent? Details of any direct and indirect non controlling interest?
- 6. Has there been any goodwill on acquisition? Or any 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 transactions? 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, balance of account or disclosure that will assist them in understanding the financial statements of the group.
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