Consolidation Notes Consolidated Statement of Cash Flows
Consolidation Notes Consolidated Statement of Cash Flows
Consolidation Notes Consolidated Statement of Cash Flows
Consolidation Lecture 11
Notes Consolidated Statement of Cash Flows
INTRODUCTION
This lecture assumes that you are familiar with individual entity’s statement of cash flows. The
group statement of cash flows has further three elements:
1. Cash paid to NCI (i.e. dividends paid to NCI)
2. Cash received from associates (i.e. dividends received etc.)
3. Acquisition and disposal of subsidiaries
Non-Controlling Interest
$000 $000
NCI decrease – step acquisition XXX Balance b/d XXX
Cash (dividends paid) β ?? NCI share of profit XX
Balance c/d XXX NCI increase – partial disposal XX
XXX XXX
EXAMPLE 11A
The following information has been extracted from the consolidated financial statements of WG for
the years ended 31 Dec:
2007 2006
$000 $000
NCI in consolidated net assets 780 690
NCI in consolidated profit after tax 120 230
What is the dividend paid to non controlling interests in the year 2007?
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Consolidation Notes: Lecture 11 Lecture Notes
Investment in Associates
$000 $000
Balance b/d XXX Impairment loss XX
Share of profit XX Cash (shareholding sold) XX
Share of other reserves XX Cash (dividend received) β ??
Cash (further investment) XX Balance c/d XXX
XXX XXX
EXAMPLE 11B
The following information has been extracted from the consolidated financial statements of H for
the year ended 31 December 2001:
Current assets
Receivables 260 190
Show the relevant figures to be included in group statement of cash flows for the year ended 31
December 2001.
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Consolidation Notes: Lecture 11 Lecture Notes
The assets and liabilities purchased (or disposed of) are not shown with the cash outflow (or
inflow) in the statement of cash flows. All assets and liabilities acquired (or disposed of) must be
included in any workings to calculate the cash movement for an item during the year. If they are
not included in deriving the balancing figure, the incorrect cash flow figure will be calculated. This
applies to all assets and liabilities acquired (or disposed of) including the NCI.
A note to the statement of cash flows should show a summary of the effects of acquisitions and
disposals of subsidiaries, indicating how much of the consideration comprised cash and cash
equivalents and the assets and liabilities acquired or disposed of.
EXAMPLE 11C
The extracts of a company’s statement of financial position is shown below:
2008 2007
$ $
Inventory 74,666 53,019
During the year, a subsidiary was acquired. At the date of acquisition, the subsidiary had an
inventory balance of $9,384.
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Consolidation Notes: Lecture 11 Lecture Notes
[Entity Name]
Statement of cash flows
For the year ended [date here]
Cash flows from operating activities: $’000
Profit before tax XXX
Adjustments for:
[non-cash income and expenses included in SPL] XX/(XX)
[items of income and expenses relating to investing or financing
activity but included in SPL] XX/(XX)
[post-employment benefit expense, finance income and
expense] XX/(XX)
Impairment of goodwill (if any) XX
Share of profit from associate (if any) (XX)
Operating profit before working capital changes XXX
[increase on decrease in current assets and liabilities] Note 1 XX/(XX)
Cash generated from operations XXX
Interest paid (XX)
Pension benefits paid (XX)
Income tax paid (XX)
Net cash from (used in) operating activities A XXX
Note1: Remember to take effect of acquisitions, disposals, and exchange gain or loss.
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Consolidation Notes: Lecture 11 Lecture Notes
EXAMPLE 11D
Set out below is a summary of the accounts of Boardres, a public limited company, for the year
ended 31 Dec 2007.
Consolidated income statement for the year ended 31 Dec 2007 $000
Revenue 44,754
Cost of sales and other expenses (39,613)
Income from associates 30
Finance cost (305)
Profit before tax 4,866
Tax (2,038)
Net profit for the period 2,828
Attributable to:
Owners of the parent 2,805
Non-controlling interests 23
2,828
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Consolidation Notes: Lecture 11 Lecture Notes
Non-current liabilities
Loans 2,102 1,682
Provisions (note 3) 1,290 935
Current liabilities (note 2) 9,228 5,646
29,616 22,444
(3) Provisions
Provisions Deferred Total
Pension taxation
$000 $000 $000
At 31 Dec 2006 246 689 935
Exchange rate adj 29 - 26
Increase in provision 460 - 460
Decrease in provision - (134) (134)
At 31 Dec 2007 735 555 1,290
(4) Liberated
During the year, the company acquired 82% of the issued share capital of Liberated, a
limited liability company, for cash consideration of $1,268,000. The fair values of the assets
of Liberated were as follows:
$000
Non-current assets 208
Inventories 612
Receivables 500
Cash in hand 232
Trade payables (407)
Debenture loans (312)
833
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Consolidation Notes: Lecture 11 Lecture Notes
(6) The non-controlling interest is valued using the proportion of net assets method.
Required:
Prepare the statement of cash flows for the year ended 31 Dec 2007.
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Consolidation Notes: Lecture 11 Lecture Notes
ANSWER 11A
Non-Controlling Interest
$000 $000
Cash (dividends paid) β 30 Balance b/d 690
Balance c/d 780 NCI share of profit 120
810 810
ANSWER 11B
Extracts from statement of cash flows
$000
Cash flows from operating activities
Profit before tax 802
Adjustments for:
Share of profit from associates (68)
ANSWER 11C
The movement on inventory is [($74,666 – 9,384 Acquisition) – $53,019] = $12,263
This will be shown as outflow.
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Consolidation Notes: Lecture 11 Lecture Notes
ANSWER 11D
Statement of cash flows for the year ended 31 Dec 2007
Cash flows from Operating activities $000
Profit before tax 4,866
Adjustment:
Depreciation (Note1) 907
Impairment of goodwill (W1) 85
Gain on disposal of assets 854 – 305 (Note 1) (549)
Increase in pension provisions (Note 3) 460
Interest expense 305
Share of profit from associate (30)
Operating profit before working capital changes 6,044
Increase in inventory 9,749 – 7,624 – 612 acq – 116 ex diff (Note 4, 5) (1,397)
Increase in receivables 5,354 – 4,420 – 500 acq – 286 ex diff (Note 4, 5) (148)
Increase in payables 4,278 – 2,989 – 407 acq – 209 ex diff (Note 2, 4, 5) 673
Cash generated from operations 5,172
Interest paid (305)
Tax paid (W2) (1,016)
Net cash from operating activities (A) 3,851
Cash flows from Investing activities
Purchase of non-current assets (W3) (3,038)
Proceeds on disposal (Note 1) 854
Cash paid on acquisition of subsidiary, net of cash acquired $1,268 – 232 (Note 4) (1,036)
Dividend received from associate (W4) 10
Net cash using in investing activities (B) (3,210)
Cash flows from Financing activities
Dividends paid (445)
Dividends paid to NCI (W6) (20)
Proceeds from debt issue (W5) 108
Net cash used in financing activities (C) (357)
W2 Tax
Cash 1,016 Bal b/f – CT 2,566
Bal c/f – CT 3,722 Bal b/f – DT 689
Bal c/f - DT 555 I/S 2,038
5,293 5,293
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Consolidation Notes: Lecture 11 Lecture Notes
W5 Debentures
Bal c/f 2,102 Bal b/f 1,682
Acquisition 312
Cash 108
2,102 2,102
W6 Non-controlling interest
Cash 20 Bal b/f 17
I/S 23
Bal c/f 170 Acq (18% x 833) 150
190 190
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