Answer the questions at least 100 words.

1. List three regulatory and reporting requirements that a listed company in Australia has to comply with. Also, list the corresponding regulatory bodies that are responsible for the three requirements.

2. Explain what is meant by the term 'control'. As part of your explanation outline whether control requires an ownership interest of at least 50%.

3. Discuss the criteria used to identify subsidiaries and associates in company acquisitions.

4. Discuss the benefits and problems of Equity accounting and compare it with those of other investment recording techiques such as cost method, and cosolidation.

Department of Accounting and Corporate Governance ACCG 308 Corporate Accounting and Business Advisory 2017 Semester 1 Week 10 Lecture Page 1 INTRA-GROUP TRANSACTIONS Jubb chapter 20 INTRODUCTION Transactions: * Between parent and subsidiary * Between fellow subsidiaries ....are intra-group transactions (I/Gs), also called intercompany transactions I/Gs affect both companies; namely * Affected items revenues/expenses * debtors/creditors if on credit profits They do not effect group equivalents Eliminate all aspects of I/Gs from group data. * Assume wholly owned group for now: ... eliminate I/Gs 100% I/Gs examined are dividend appropriations, supply of finance & interest charges supply of goods/services + mark up fixed asset transfers debt in the form of debentures. Data on I/Gs in problems/examples * Disclosed as separate F/S items * Hidden in other F/S items but signaled by additional information Page 2 I/G -THE EXCHANGE Exchange creates revenue & expense of same amount *Affects each company's profit and loss Eliminate exchange from aggregate group data * How: Dr revenue item Cr expense item * Why: Prevent overstatement - gross * When: Consolidated financial statement (CFS) design has this level of detail Exchange of services * Professional, Management, Financial Dr Consulting fee (revenue) Cr Consulting fee (expense) Eliminate intercompany consulting fees xxxx Exchange of goods * Expensed immediately Dr Sales Cr Food supplies (expense) Eliminate intercompany sale of goods xxxx * Taken to inventory Dr Sales Cr Purchases (or COGS) Eliminate intercompany sale of goods xxxx xxxx xxxx xxxx Dividends from sub received as revenue * Impact of subsidiary's dividend on group: Shifts profit location Doesn't increase/reduce group profit Dr Dividend revenue Cr Dividend appropriation/retained profits Eliminate intercompany dividend * xxxx xxxx Impact of parent's dividend on group: Reduces group retained profits & net assets Cash outflow to parent shareholders Page 3 I/G - RECEIVABLES & PAYABLES Loans and ancillary debts * Flow on effect of exchanges on credit * Receivable & payable of same amount * Eliminate from aggregate group data How: Dr payable; Cr receivable Why: Examples ... finance loans ... ... ... Prevent overstatement - gross interest accrued on loans dividend declared and owing trade debts Dr Dividend payable Cr Dividend receivable Eliminate I/G dividend debt xxxx xxxx Bills of exchange * Procedures 'Acceptor' promises to pay fixed sum to 'drawer' at stated future date Drawer can: ... hold until due; collect full sum from acceptor ... discount to bank for immediate, smaller sum Discounting terms: ... 'with recourse' ... 'without recourse' Acceptor not aware of discounting until bill presented for payment Page 4 * If drawer & acceptor are both group companies, then Bills held to maturity: ... show in group data as receivable & payable ... eliminate just like any other debt Bills discounted without recourse: ... cease to be I/G debt ... do not eliminate. ... data adjustment to Bill Payable Bills discounted with recourse: ... as above + eliminate contingent liability Example 1: I/G bills Adam accepts bills for $700 in favour of Eve. Eve discounts $400 of these with recourse. Eve Assets .... Bills rec'ble: from Adam from others Consolidation worksheet - extract Adam Adjustments Sum Eliminations Dr Cr Dr Cr 300 800 1100 600 600 1600 1600 700 700 300 1400 1700 1 300 2000 2300 300 1 300 Group 1400 1400 .... Liabilities Bills pay'ble: to Eve to others .... Notes to accounts: Contingent liability 1900 - 400 a a 400 ___ 400 ___ 400 400 a ___ 300 1500 2000 2000 ___ 300 1500 Page 5 I/G - PROFITS Service exchanges * Show cost of providing service in CFS * Exchange elimination also eliminates profit Example 2: Profit on I/G exchange of services Consolidation worksheet - extract Cain Abel Adjustments Dr Cr Sum Eliminations Dr Cr Group Profit statement .... Service fee .... Less: Service cost Impact on profit * 4800 4800 4800 3000 4800 7800 1800 (4800) (3000) - 4800 3000 (3000) Generalisation: Profit in transfer price automatically eliminated by exchange elimination if item exchanged is fully expensed Page 6 Exchanges of goods - inventory to inventory Group data includes transfer price profitmust be removed. Example 3: Profit on I/G exchange of goods in stock Shem sells to Ham for $950 goods that cost $620 in the same period (20X4). Goods remain in stock. No other inventory or transactions. (a) Both companies keep periodic inventory records. Consolidation worksheet June 30 20X4 - extract Shem Adjustments Sum Eliminations Group Dr Cr Dr Cr Ham Profit statement Sales 950 950 950 950 620 - 1 570 950 = Cost of sales - 620 620 - Gross profit ..... Balance sheet ..... Inventory - 330 330 - 950 - 950 O/ inventory Purchases C/inventory 950 1 1 330 2 2 950 - 330 620 620 620 Note that debit to closing inventory (COGS calculation) decreases it. Credit to closing inventory (balance sheet) decreases it. Page 7 (b) Both companies keep perpetual inventory records. Ham Profit statement Sales Cost of sales Gross profit ..... Balance sheet ..... Inventory Shem - 950 950 620 330 Consolidation worksheet - extract Adjustments Sum Eliminations Dr Cr Dr Cr 950 620 330 950 1 330 2/1 950 950 2 330 Group - 620 Note: do not net the cost of sales eliminations entries, i.e. $950-330 to $620. This might appear to be OK but it causes problems with carry forward balances and opening entries across periods. Page 8 * Case 3: Transferred inventory @ NRV being