Consolidation of Statement of Cash Flows
Accounting Rules
Group Structure Changed During Current Year?? (Any acquisition/disposal made??)
No Yes
No…not changed during current year Yup… yes changed during current year
Then perform following additional workings
➢ Investment in associate New Subsidiary Existing Subsidiary
➢ Goodwill Acquired During CY Disposed During CY
➢ NCI
perform following Only Cash Inflow – Perform
Only Cash Outflow – Cash &Cash Equivalent of subsidiary additional
on acquisition date additional working Cash &Cash
working of:
Equivalent of
subsidiary on ➢ Disposal
acquisition date A/C
Only “Cash”
Show in “Investing Activities” ➢ Cost of Control ➢ Business
Outflow and
Sale A/C
“Inflow” ➢ Business Purchase
consideration Account Show in “Investing Activities”
Kindly see Page 142 from ICAP Book for format.
➢ Note: Exchange Rate Differences
➢ A loss arising from exchange rate differences (shown in the example that follows as
‘foreign exchange loss’) must be added back.
➢ A gain arising from exchange rate differences must be subtracted.
For Rest of Details MUST see CHAPTER NO. 8
NCI Dividend Paid by Subsidiary
Saada Waala Foreign Exchange Gain/Loss Waala
Simply Show Under “Financing Activities” Do Foreign Exchange Gain/Loss Adjustment
Dividends paid to NCI
Rs.
If Gain Add NCI % Only If Loss Subtract NCI % Only
Non-controlling interest in group net assets at the beginning of the
year X
Non-controlling interest in profits after tax for the year X
Add non-controlling interest share of foreign exchange gain (or
subtract NCI share of a loss) X/(X) Net Amount Show Net Amount Show
X Under “Financing Under “Financing
Dividends paid to non-controlling interests (as a balancing figure) X Activities” Activities”
Non-controlling interest in group net assets at the end of the year X
Associate (or JV) and the Group Statement of Cash Flows
Golden Rule:
As far as cash flows are concerned, the associate (or JV) is outside the group as they are accounted for under Equity Method (IAS 28).
In Case of Indirect Method Used
➢ The group’s share of the profit of an associate (or JV) must be deducted from profit.
➢ The group’s share of the loss of an associate (or JV) must be added to profit.
Following Cash flows from/with Associates (or JV) are included under:
Investing activities
➢ cash paid to acquire shares in an associate (or JV) during the year
➢ cash received from the disposal of shares in an associate (or JV) during the year
➢ dividends received from an associate during the year.
Financing activities
➢ cash paid as a new loan to or from an associate (or JV) during the year
➢ cash received as a repayment of a loan to or from an associate (or JV) during the year.
Dividends received from an associate (or JV)
Rs.
Group investment in net assets of associate (or JV) at the beginning of
the year X
Group share of associate’s (or JV’s) profits before tax X
X
Dividends received from associate (or JV) in the year (X)
Group investment in net assets of associate (or JV) at the end of the X
year
Very Important Note to be Included in Group Consolidated Statement of Cash Flow
(Business Purchase Note)
Illustration: Note to the cash flow statements acquisition
Rs.
Assets of the subsidiary at the acquisition date, at fair value X
Liabilities of the subsidiary at the acquisition date (X)
Net assets of the subsidiary at the acquisition date X
Minus non-controlling interest in the subsidiary at this date
(% Non-controlling interest × Net assets) (X)
Cost of Control Account (P Share of S Net Assets) X
Purchased goodwill X
Total Fair value of net assets acquired for P (Equals Purchase Consideration also) X
Satisfied by:
New shares in holding company issued as consideration X Equal
Cash X
Total Purchase consideration X
The total purchase consideration equals the fair value of the net assets acquired.
The cash of the subsidiary at the acquisition date (C2) is then deducted from the cash paid (C1) to
arrive at the figure that appears in the statement of cash flows for the ‘Acquisition net of cash
received’ (Only Cash Outflow – Cash and Cash Equivalent) → Investing Activities in Group Consolidated Statement of Cash Flows
If Subsidiary Acquired During the Current Year
Its Assets/Liabilities at Acquisition Date are NOT result of Group Cash Flows but its Former Shareholder
deduct from the value in the add to the value in the opening
closing statement of financial statement of financial position
position OR
If Subsidiary Acquired During the Current Year
Perform reverse of above
