ACX2100 Chap.11 Consolidation: Control, Acquisition Analysis and BCVR
Consolidation: Control, Acquisition Analysis and BCVR
AASB 10 control joins three conditions: present decision-making power over relevant activities, exposure or rights to returns that vary, and a link enabling that power to change those returns. Ownership percentages are evidence rather than the definition: practical control can arise below 50%, while engaged opposing holders can prevent a 49% investor from controlling.
Once control exists, group statements aggregate parent and subsidiary balances line by line after aligning reporting dates and policies. Consolidation adjustments live on a temporary worksheet and must be rebuilt each period. Step 1 compares acquisition cost with FVINA.
Step 2 records business combination valuation reserve adjustments where group fair value differs from the subsidiary’s carrying amount; unchanged tax base creates related DTL or DTA. Later depreciation or realisation is posted each year, with prior-period effects routed through opening retained earnings and current effects through current profit.
Step 3 eliminates the parent’s investment against acquisition-date subsidiary equity and BCVR and recognises goodwill. Three extracted acquisition analyses have lost leading digits; the correct $200,000 addends are re-derived from stated totals rather than copied. The Hitech/Lotech depreciation sequence is retained as a verified method spine.
What this chapter covers
- 01
Parent, subsidiary and group definitions
- 02
Power over relevant activities
- 03
Exposure to variable returns
- 04
Linking decision-making power to returns
- 05
Control below and above 50%
- 06
Line-by-line aggregation
- 07
Temporary consolidation worksheet
- 08
Acquisition analysis and FVINA
- 09
BCVR fair-value and tax entries
- 10
Consequential depreciation across reporting dates
- 11
Pre-acquisition equity elimination
- 12
Current versus opening-retained-earnings routing
AskSia-authored practice — acquisition analysis, BCVR and pre-acquisition elimination
- BCVREquipment uplift $30,000 creates DTL $9,000 because asset CA rises above unchanged TB. Net BCVR is $21,000.
- FVINAFVINA is share capital $300,000 + retained earnings $160,000 + reserve $40,000 + net BCVR $21,000 = $521,000.
- GoodwillGoodwill is consideration $620,000 − FVINA $521,000 = $99,000.
- EliminateEliminate investment against $300,000 share capital, $160,000 retained earnings, $40,000 reserve and $21,000 BCVR, and debit goodwill $99,000.
- ProofThe five debit amounts total $620,000, exactly matching the investment credit.
Key terms
- Control
- Present decision-making power, exposure to variable returns and a practical link between them.
- Relevant activities
- Activities that significantly affect an investee's returns and over which power is assessed.
- Consolidation worksheet
- Temporary group-level schedule that aggregates and eliminates balances without posting entries into legal-entity books.
- BCVR
- Net acquisition-date fair-value adjustment after related tax effects, recognised at group level.
- Pre-acquisition elimination
- Removal of the parent's investment against subsidiary acquisition-date equity, BCVR and resulting goodwill or bargain effect.
Consolidation: Control, Acquisition Analysis and BCVR FAQ
Can an investor control with less than 50%?
Yes, if substantive rights and dispersed ownership give practical power, together with variable returns and linkage. The percentage alone is not conclusive.
Why must consolidation entries be repeated?
They are not posted to parent or subsidiary books. Each new worksheet begins with legal-entity balances, so surviving and prior-period adjustments must be rebuilt.
Why does an equipment uplift create a DTL?
Group carrying amount rises while tax base remains unchanged, creating an asset taxable temporary difference.
Where does prior-year extra depreciation go?
Its accumulated after-tax effect is reflected in opening retained earnings; only the current year's extra depreciation affects current profit.
Exam move
Practise control as a three-element narrative, including a below-50% and a non-control 49% case. Build acquisition analysis in a column that must re-add to FVINA before goodwill. For BCVR, write gross fair-value change, tax effect and net reserve, then roll the surviving adjustment across two reporting dates.
The taught equipment spine is $190,000 group value versus $150,000 subsidiary value over four years, producing $10,000 extra depreciation annually and $3,000 DTL reversal at 30%. Week 10 prescribed readings are Chapters 27 and 28. Keep acquisition-date and post-acquisition work on visibly separate sheets.
For each control scenario, name the relevant activities, the decision rights and the variable returns rather than treating ownership percentage as the conclusion. For each fair-value adjustment, maintain a miniature roll-forward with gross uplift, deferred tax, remaining uplift and cumulative extra depreciation.
Reperform the Hitech/Lotech sequence after changing the remaining life; the annual expense and tax reversal should change, while the acquisition-date gross adjustment should not. Before posting an elimination, say whose books contain the amount and why the group statement must replace it.
Finish by proving FVINA independently and reconciling each later BCVR balance to the acquisition-date reserve less realised after-tax adjustments.
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