Consolidated Financial Statements

Master 2020/2021

Category 'Best Course for Broadening Horizons and Diversity of Knowledge and Skills'

Category 'Best Course for New Knowledge and Skills'

Type: Elective course (Strategic Corporate Finance)

Area of studies: Finance and Credit

Delivered by: School of Finance

Where: Faculty of Economic Sciences

When: 1 year, 4 module

Mode of studies: distance learning

Instructors: Sergey A. Kuzubov

Master’s programme: Strategic Corporate Finance

Language: English

ECTS credits: 3

Contact hours: 20

Full Syllabus

Abstract

Course is designed for master students who have had experience with International Financial Reporting standards, who studied local or international financial accounting practices before or has accounting background. This course starts classification of investments into financial assets, into associated companies based on the criteria of significant influence, and into subsidiaries based on the criteria of control. We proceed with the question of business combinations starting with the development of the understanding what is business combination as it is defined in IFRS, what the notion of business is, and then discuss the indicators of this kind of deals as opposed to purchasing a selection of assets and liabilities. This course looks in details at 4 steps of accounting for business combinations, initial recognition and measurement of identified intangible assets and goodwill, calculation of non-controlling interest. It also covers the issue of subsequent goodwill impairment. Consolidation principles and techniques are studied, as well the scope of consolidation and exceptions. Also the course is focused on the accounting and reporting for associates using equity method. The course does not require extensive knowledge of mathematics and statistics. The course has a course on IFRS as a prerequisite. Ссылка на онлайн-курс:https://ru.coursera.org/learn/advanced-financial-reporting

Learning Objectives

To acquire the ability to apply specific accounting standards and legislations to different transactions and events and in preparation and presentation of consolidated financial statements of various business entities

Expected Learning Outcomes

. Define control (IFRS 10 Appendix A and IFRS 10.5-.18)
Identify situations in which consolidated financial statements should be presentedand the scope of consolidated financial statements (IFRS 10.4).
Account for business combinations by applying the acquisition method [IFRS 3.4-.53]
Account for a business combination in which control is achieved in stages[IFRS 3.41-.42]
Account for measurement period adjustments [IFRS 3.45-.50].
Determine what forms part of a business combination [IFRS 3.51-.52].
Test goodwill for impairment annually, or more frequently if events or changes incircumstances indicate that the asset might be impaired in accordance withIAS 36.10(b)
Identify a business combination [IFRS 3.3].

Course Contents

Introduction to groups.
Discuss the history and motives for business combinations. Recognize when consolidation of financial information into a single set of statements is necessary. Define the term business combination and differentiate across various forms of business combinations. The concepts of control and ownership. Describe a variable interest entity, a primary beneficiary, and the factors used to decide when a variable interest entity is subject to consolidation.
Consolidation principles and techniques
The acquisition method/ How to determine the acquirer – who has control. Determine the total fair value of the consideration transferred for an acquisition and allocate that fair value to specific subsidiary assets acquired (including goodwill) and liabilities assumed or to a gain on bargain purchase. Fair value hierarchy/. Identifying principal am most advantageous market/ Discuss the rationale for the goodwill impairment testing approach. Describe the procedures for conducting a goodwill impairment test. Understand the accounting and reporting for contingent consideration subsequent to a business acquisition
Consolidated Financial Statements with Non-controlling Interest
Describing the valuation principles underlying the acquisition method of accounting for the non-controlling interest. Allocating goodwill acquired in a business combination across the controlling and non-controlling interests. The computation and allocation of consolidated net income in the presence of a non-controlling interest. Identifying appropriate placements for the components of the non-controlling interest in consolidated financial statements. The impact on consolidated financial statements when a step acquisition has taken place. Recording the sale of a subsidiary (or a portion of its shares). Prepare the journal entry to consolidate the accounts of a subsidiary. Prepare a worksheet to consolidate the accounts of two companies that form a business combination
Intra-group transactions.
Accounting for associates.
Describe in general the various methods of accounting for an investment in equity shares of another company. Identify the sole criterion for applying the equity method of accounting and guidance in assessing whether the criterion is met. Prepare basic equity method journal entries for an investor and describe the financial reporting for equity method investments. Allocate the cost of an equity method investment and compute amortization expense to match revenues recognized from the investment to the excess of investor cost of investee book value. Record the sale of an equity investment and identify the accounting method to be applied to any remaining shares that are subsequently held. Describe the rationale and computations to defer unrealized gains on intra-entity transfers until the goods are either consumed or sold to outside parties. Explain the rationale and reporting implications of the fair-value option for investments otherwise accounted for by the equity method.
Consolidation of foreign operations
Understand concepts related to foreign currency, exchange rates, and foreign exchange risk. Explaining the difference between functional and presentation currency and adjustments for foreign currency transactions. Accounting for the translation of foreign currency transactions and monetary/non-monetary foreign currency items at the reporting date. Translate a foreign subsidiary's financial statements into its parent's reporting currency using the current rate method and calculate the related translation adjustment. Prepare a consolidation worksheet for a parent and its foreign subsidiary.

Assessment Elements

Work Activity
Homework
Written exam
This is written, closed-book computer-based exam. The examination is on the LMS platform (https://lms.hse.ru). You need to connect to the exam according to the schedule. If you cannot take an exam, you must contact the instructor prior to the start of the exam. All questions in the exam are compulsory. The exam contains a mix of objective test with 20 multiple-choice questions (4 marks) and longer problem study for consolidation (6 marks) with a duration of 2 hours. The pass mark will be 40%. At all written exams the student has access to the basic IT application package (Microsoft Office), pen and paper Students are not allowed during the exam: to use lecture notes, internet resources and other hints. A momentary disruption of communication during the examination is considered to be a communication failure of less than one minute. Long-term disruption of communication during the examination is considered a violation of one minute or more. If there is a long-term disruption in communication, the student cannot continue to take the exam. The retake procedure involves the use of complicated tasks.

Interim Assessment

Interim assessment (4 module)
0.4 * Homework + 0.1 * Work Activity + 0.5 * Written exam

Bibliography

Recommended Core Bibliography

Krimpmann, A. (2015). Principles of Group Accounting Under IFRS. Chichester, West Sussex, UK: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=968959

Recommended Additional Bibliography

Association of Chartered Certified Accountants (Great Britain). (2017). ACCA (Vol. Tenth edition). Wokingham, Berkshire: BPP Learning Media. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=nlebk&AN=1516458
BPP Learning Media (Firm). (2017). ACCA Paper F7 (Vol. Eleventh edition). London: BPP Learning Media. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1515138

Course Syllabus