SweetieCake Ltd Accounting Case Study Sample

• Subject Name : Accounting and Finance

Consolidated Financial Statements

Executive Summary of Consolidated Financial Statements

This paper will discuss various transactions that took place on or before December 31st, 2020. These varying transaction will call for certain AASB in respect of [AASB 10] Consolidated Financial Statements. The treatment of the transactions will therefore ensure true and fair view of the consolidated statements and reflect transactions as per AASB 103 – Business Combinations and AASB 101 – Representation of Financial Statements; thus ensuring IFRS, GAAP, and AASB compliance.

Table of Content

Memorandum

Background

Investment in Pastry Products and Blackberries Ltd

Trademark

Conclusion

References

Introduction to Consolidated Financial Statements

Memorandum

To: Senior Management of SweetieCake Ltd

From: An Accountant

CC: CFO of SweetieCake Ltd

Date: June 15, 2020

Subject: Re various [consolidated] transactions prevailing year end date

The memorandum will talk about different transactions that took place during the financial period. These transactions initial recognition and measurement associated with the consolidated financial statements will follow the relevant standard.

1. Investment in Pastry Products and Blackberries Ltd:

The AASB 127 significant influence as the power to participate in the operational policy decisions and the financial statements of the acquire/ investee, thus making it out of the scope of control or joint control (AASB 127, para 4). AASB 10 Consolidated Financial Statement specific’s and broadens the standards meaning, in terms of:

• Control of an acquire by group and parent;
• Separate financial statements;
• Subsidiaries (AASB 10, Appendix A).

Since the minimum investment in Pastry Products were 20% and Blackberries hold 75% of significant influence in Blackberries Ltd, this means that there is a significant influence through subsidiaries. These will be recorded under equity method but there is an exemption given is owned more than partially (75% for Blackberry), while Pastry will be treated as equity method – i.e. at cost, and carrying value is decreased/increased per profit/loss share of acquire following post-acquisition, while changes recognised in SOCI (AASB 101, Presentation of Financial Statements).

The purchase consideration will follow the standard AUASB 3 Business Combinations. PPE will be notionally restated to fair value whereas shares will be recorded under same standard as a line-by-line item. The fair value of additional payment will be offset against instruments issued (if any).

2. Trademark

Blackberries Ltd has an option to opt for cost model or revaluation method as per AASB 138 – Intangible assets (paragraph 74 and 75 respectively). If it is held at revaluation method, all other assets should be bought to same model, unless there is no active market for those assets. This means it cannot be valued at revalued amount but at cost less any accumulated amortisation and any impairment losses. Inability to do so will overstate profit substantially. Since there is a sudden breakthrough or existence of revaluation it should be reflected to the entire class of intangible asset – i.e. trademark.

Conclusion on Consolidated Financial Statements

These significant matters were material and financial statements should reflect the transactions as stated by the AASB/IFRS. The following transactions have been adjusted to reflect true and fair view.

References for Consolidated Financial Statements

Stevenson, K.M., 2012. The Changing IASB and AASB Relationship. Australian Accounting Review, 22(3), pp.239–243.

Paulech, Z. & Voogt, M., 2018. Definition of a business: Amendments to AASB 3 Business Combinations. KPMG. Available at: https://home.kpmg/au/en/home/insights/2018/12/aasb-3-business-combinations-amendments.html [Accessed June 15, 2020].

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