In: Accounting
1. AASB 127 requires that NCI be reported as a separate item of owners’ equity. Discuss the effect of this requirement on the consolidation process.
2. Discuss whether there are differences in principle or detail in the way current- and prior-year intra-group transactions influence the calculation of NCI.
ANSWER-1)
Separate disclosure will not be consistent with underlying entity concept: As per the entity concept the group is an entity of single cohesive which from shareholders raises equity capital. The capital is channelled into which part of the entity is not a concern and as a result all ordinary shares in the parent as well as subsidiaries lead to a homogenous shareholdings collection. It will be the similar argument that is applicable to the single company. It would not distinguish ordinary shares issued by a company at numerous times or used while financing various activities
Separate disclosure requires for the performance of the allocations arbitrary: AASB 101 in the consolidated financial statements specifies the disclosure separately:
-- Consolidated total comprehensive profit in specified period
-- The consolidated profit or loss in specified period
-- Total profit comprehensively in the Statement of Changes in Equity
-- Total consolidated owners’ equity
For the purposes of consolidation there should be more rely on the group perspective of intra-group transactions, as the intra-group transactions can cause certain costs of relocating assets
Allocation causes complexity of the consolidation process: Lack of allocation would make it necessary only to produce the worksheet display up to column for ‘Group’. It will give the information that helps to prepare formal consolidated statements by combining the entitlements of all shareholders. Omitting the allocation patently can decrease the pressure of work and create difficulty in preparing the consolidation
As per policy we have to answer first question