Consolidated statement of financial position - part 5

In this lesson

1. 0:00 Consolidation adjustments overview
2. 1:35 Intercompany transactions cancellation
3. 3:01 Unrealised profit elimination
4. 4:04 Double entry consolidation mechanics
5. 7:02 Mid-year acquisitions explained
6. 8:33 Time apportioning profits evenly
7. 10:45 Statement of financial position timing
8. 11:44 Summary of consolidation adjustments

About this lesson

You'll master cancelling intercompany transactions and unrealised profits—essential techniques for removing artificial gains created by trading within the group—and understand how to account for mid-year acquisitions by time-apportioning profits to establish the correct net asset values at acquisition date. These adjustments are critical for SBR and AFM papers, where consolidation questions test your ability to accurately reflect group-controlled assets and eliminate internal transactions that would otherwise distort the financial position. The lesson covers four core adjustment areas. First, you'll see how to cancel intercompany sales and purchases (where one person's revenue is another's purchase) and remove unrealised profits held in inventory, with worked examples showing how the direction of the sale—parent to subsidiary or subsidiary to parent—affects which profit and inventory figures are adjusted. Second, you'll learn the time-apportionment technique for mid-year acquisitions, assuming profits accrue evenly throughout the year to calculate the precise net assets at the acquisition date, which then feeds into your goodwill calculation. The lesson clarifies a common misconception: while you add 100% of parent and subsidiary assets and liabilities line by line (because control means you own them all), you only time-apportion profit figures when determining net assets at a specific point in time. By the end, you'll confidently handle impairment, fair value adjustments, intercompany eliminations, and mid-year acquisition calculations—the complete toolkit for consolidation adjustments on the SFP.

Duration: 12m