Principles of The consolidated Statement of Profit or Loss ( Income Statement)
PRINCIPLES OF THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
The consolidated statement of profit or loss shows the profit generated by all resources disclosed in the related
Consolidated statement of financial position, i.e. the net assets of the parent company ( P) and its subsidiary (S).
The consolidated statement of profit or loss follows these basic principles:
-From revenue to profit for the year include all of P’s income and expenses plus all of S’s income and expenses (reflecting control of S).
-After profit for the year show split of profit between amounts attributable to the parent’s shareholders and the non-controlling interest ( to reflect ownership).
INTRA-GROUP TRADING
Sales and Purchases:
Consolidated sales revenue= P’s revenue + S’s revenue – intra group sales.
Consolidated cost of sales = P’s COS + S’s COS-intra group sales + URP
Interest:
The relevant amount of interest should be deducted from group investment income and group finance costs.
Dividends:
A payment of a dividend by S to P will need to be cancelled.
Unrealized Profit:
The adjustment for unrealized profit should be shown as an increase to cost of sales ( return inventory back to true cost to group and eliminate unrealized profit)
NON-CONTROLLING INTEREST ( NCI)
This is calculated as :
NCI % x subsidiary’s profit after tax……………………xx
Less:
NCI % x fair value depreciation ………………………….xx
NCI % x PURP ( subsidiary = seller only)……………….xx
NCI % x impairment ( fair value method)……………….xx
NCI…………………………………………………………………xx
Reference:
-ACCA, F7 Financial Reporting by KAPLAN PUBLISHING
-ACCA, F7 Financial Reporting by BPP