CONSOLIDATED STATEMENT of

PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

1
At the end of the lecture, students should be
able to:
 apply the accounting techniques for

consolidated statement of profit or loss

(CSOPL)
 prepare the CSOPL
 adjust for intra-group transactions
 adjust for preference shares
 adjust for acquisition of subsidiary during the

year

2
Jane Lazar (2018), Company and Group
Financial Reporting (9th Edition), Chap 13

MFRS 10 Consolidated Financial Statements

3
 Is the income statement combining the results of the
operation of the individual subsidiaries and of the
holding company.

 The various items of income and expenses in the

consolidated SOPL result from various transactions
between the group and third parties.

 The income and expenses will exclude intra-group

transactions.

4
 Combine similar items such as sales, income,
expenses and taxation on a line by line on 100%
basis even though the subsidiary being
consolidated may not be 100% owned

 Disclose portion of the results attributable to the

NCI as a separate item.

 Any appropriation of profits (eg dividends &

transfer to reserves) will be disclosed in the
statement of changes in equity.

Refer Example 1 (pg 466) of main text

5
 On 1 Jan 20X1, H acquired 75% of the issued
ordinary share capital of S which was RM60
million, comprising 40 million equity shares.

 On the acquisition date, the retained profit of

S was RM10 million.
SOPL H and S for the year ended 31
Dec 20x1 H S
RM’000 RM’000
Sales 120,000 100,000
Cost of sales (50,000) (40,000)
70,000 60,000
Operating expenses (20,000) (20,000)
50,000 40,000
Taxation (15,800) (12,400)
Profit after tax 34,200 27,600

Retained profit 1 Jan 2011 15,600 10,000

REQUIRED: Prepare consolidated SOPL for the year ended

31 Dec 20x1
 Steps to consider:
Revenue/turnover The aggregate sales of the holding company
and that of the subsidiary.

Cost of sales The aggregate cost of sales of the holding

and subsidiary.

Operating The aggregate of the parent’s and

expenses subsidiaries’ expenses.

Investment income Comprise of dividends and interest as well as

other income excluding dividends and
interest received/receivable from the
subsidiaries. Dividend from subsidiary is not
disclosed.
Taxation Combined total of the holding and subsidiary

Profit attributable Portion of profit in subsidiary shared by NCI

to NCI
 H
RM’000
Revenue (120+100) 220,000
Cost of sales (50+40) (90,000)
Gross profit 130,000
Operating expenses (20+20) (40,000)
90,000
Taxation (15.8+12.4) (28,200)
Total profit after tax 61,800

Profit after tax attributable to:

Shareholders of H (61.8 – ^6.9) 54,900
Non-controlling interest (25% x 27.6) ^6,900
Total profit for the year 61,800
 Extract of the statement of changes in equity for the year
ended 31/12/x1
Group retained profits NCI
(RM’000) (RM’000)

b/f 15,600 17,500

Profit for the year 54,900 6,900

c/f 78,300 27,000

Group retained profits:
B/f RM’000 RM’000
Retained profit of H 15,600
Retained profit of S 10,000
(-) pre-acquisition (10,000)
x 75% nil
15,600
Non-controlling interest:
B/f:
Ordinary shares (RM60m x 25%) 15,000
Retained profit b/f (RM10m x 25%) 2,500
17,500
 Dividends paid (and proposed) from subsidiary
will be recognised by the parent in its own income
statement.

 However, dividends from the subsidiary are

eliminated in the CSOPL

 This is to avoid double counting the dividends

from the S, the amount of dividends that has
been recognised by the H company has to be
cancelled

12
 Holding company received dividend of RM3,750
from its 75% owned subsidiary, which paid a
dividend of RM5,000.

 On consolidation, cancel the intra-group

dividend received by holding company with
RM3,750 dividend paid by subsidiary, leaving the
RM1,250 dividend paid by subsidiary to NCI.

13
 The CSOPL is drawn up to show the total
profit or loss of the group.
 If a member company sells goods to another

member, that sale is not regarded as sales.

 The same goes for income received from

another member where it may be an expense

to that particular member who make the
payment.
 Income recognised for consolidation

purposes is income received/receivable from

others other than from members of the
group.
14
 Consolidated expenses entail payment due to
parties outside the group

 All intra-group transactions such as sales between

companies within the group and payment of
interest and dividends to the members within the
group need to be cancelled / eliminated in full

 URP on intra-group sale of assets e.g. inventory and

non-current assets, are to be eliminated in full.

Refer Example 3 (pg 470) of main text

15
 On 1 Jan 20x3, H acquired 80% of the 5 million issued ordinary
share capital of S, paid up to RM7 million. On that date, the
retained profits of S were RM 1 million.

 H trades with S and during the current year H sold goods to S for
RM500,000.

 H sells to S at cost plus 25%. RM100,000 of these goods remain

unsold in S.

 The opening inventory of S includes goods bought from H for

RM25,000.

 S paid a dividend of RM400,000 and H has recognized its share of

dividends from S.

 H charges S for consultancy services of RM120,000 per annum. The

amount paid by S is included in its operating expenses.
SOPL for the year ended 31 Dec 20x9 H S
RM’000 RM’000
Sales 12,000 10,000
Cost of sales (5,000) (4,000)
7,000 6,000
Operating expenses (2,000) (2,000)
5,000 4,000
Consultancy services to S 120 -
Dividends from S 320 -
5,440 4,000
Taxation (1,800) (1,400)
Profit after tax 3,640 2,600

Retained profit 1 Jan 20x9 15,600 2,400

Ordinary dividends paid in 20x9 1,000 400

REQUIRED: Prepare SOPL

 Steps to consider:
Revenue The aggregate sales of the holding company and that of the
/turnover subsidiary.
• Sales of H = RM12 m ; Sales of S = RM10 m
• Intra-group sales = RM500 k
•Group sales = RM 12m – RM 500k + RM 10m = RM 21.5m
Cost of Group COS:
sales Parent’s COS + Subsidiary’s COS – intra-group purchases –
(COS) URP on opening stock + URP on closing stock

• H = RM 5m; S = RM 4m
• RM 100k of goods from H remain unsold.
• URP (opn. stock) = RM 25k x 25/125 = RM 5k
• URP (clos. stock) = RM 100k x 25/125 = RM 20k
Group COS:
= RM 5m + RM 4m – RM 500k – RM 5k + RM 20k
= RM 8,515,000
 Steps to consider:
Operating expenses The aggregate of the parent’s and subsidiaries’
expenses cancelling any intra-group items of expenses
but adjusting for items such as depreciation, which
arise only in consolidated accounts .
•H – RM 2m ; S – RM 2m
•Intra-group expenses = RM 120k
Group operating expenses:
= RM 2m +RM 2m – RM 120k
= RM 3,880,000
Revenue from Revenue from members of the group is eliminated
subsidiary

Investment income Comprise of dividends and interest as well as other

income excluding dividends and interest
received/receivable from the subsidiaries. Dividend
from subsidiary is not disclosed.
 Steps to consider:
Taxation Combined total of the holding and subsidiary.
Group taxation:
= RM 1.8m + RM 1.4m
= RM 3,200,000
Profit attributable to Portion of PAT of subsidiary after adjusting for group
NCI adjustments attributable to NCI.
= PAT of S x 20%
= RM 2.6m x 20%
= RM 520,000
Impairment loss on Is written off in the CSOPL.
goodwill
•Partial goodwill – does not affect the profit
attributable to NCI
•Full goodwill – reduce the NCI portion of net profit
of subsidiary by NCI proportion in interest in
subsidiary.
 H
RM’000
Revenue (12,000+10,000-500) 21,500
Cost of sales (5,000+4,000-500-5+20) (8,515)
Gross profit 12,985
Operating expenses (2,000+2,000-120) (3,880)
9,105
Taxation (1,800+1,400) (3,200)
Total profit after tax 5,905

Profit after tax attributable to:

Shareholders of H 5,385
Non-controlling interest (20% x 2,600) 520
5,905
Group retained profits:
RM’000 RM’000
R. profit of H – URP on op. stock (15,600 - 5) 15,595
R. profit of S 2,400
(-) pre-acquisition (1,000)
1,400
x 80% 1,120
16,715
Non-controlling interest:
B/f:
Ordinary shares (RM 5m x 20%) 1,000
Share premiums (RM 2m x 20%) 400
Retained profit b/f (RM 2.4m x 20%) 480
1,880
 Steps to consider:
Dividends • Disclosed the parents’ dividends paid.
•Dividends paid to NCI are deducted from the NCI’s
retained profit.
NCI’s:
= RM 400k x 20%
= ^RM 80k

Extract of the statement of changes in equity

Group retained profits NCI
(RM’000) (RM’000)
b/f 16,715 1,880
Profit for the year 5,385 520
Dividends paid (1,000) ^ (80)
c/f 21,100 2,320
 Where the subsidiary has issued preference
share capital, the preference dividends
attributable to the preference shareholders have
to be identified.

 If holding company did not hold any preference

shares of the subsidiary, then all the dividends
due to the preference shareholders will form part
of the profits attributable to NCI

Refer Example 4 (pg. 475)

24
 On 1 Jan 20x3, S had the following items in its accounts:
◦ 10 million ordinary shares RM 15m
◦ 10 million 14.4% cumulative pref. shares RM 10m
◦ Retained profit RM 4 m
◦ 10% loan stock RM 10m

 On 1 Jan 20x3, H purchased 8m ordinary shares, 3m

cumulative preference shares and RM 4m loan stock of S.
 On that date, the depreciable non-current assets of S had a
FV of RM 14m but its carrying value was RM 10m. The
remaining economic life of the asset was 10 years. S did not
incorporate the FV in its accounts. Ignore deferred tax.
Depreciation is charged as operating expenses.
 Goodwill on consolidation attributable to the parent was
calculated to be RM 5m of which RM 2m was impaired
previously. There is no further impairment of goodwill as at
31 Dec 20x4.

 During the year 20x4, S sold inventory of sale value RM 15m

to H. S makes a profit of 50% on cost. H has not sold any of
these goods. This is the first year that S sold goods to H.

 Following are the abridged SOPLs of H and S for the year

ended 31 Dec 20x4.

 You are required to prepare the consolidated SOPL for the

year ended 31 Dec 20x4.
SOPL for the year ended 31 Dec 20x4 H (RM’000) S (RM’000)
Sales 120,000 100,000
Cost of sales (50,000) (40,000)
70,000 60,000
Operating expenses (20,000) (20,000)
50,000 40,000
Interest on loan stock - (1,000)
Other interest expense (250) (300)
Interest from S 400 -
Dividend from S - ordinary 2,400 -
Dividends from S - preference 216 -
52,766 38,700
Taxation (15,826) (10,400)
Profit after tax 36,940 28,300

Retained profit 1 Jan 20x4 25,600 7,400

Ordinary dividend paid in Jan 20x4 10,000 3,000
Preference dividend paid – half-year - 720
 Steps to consider:
Revenue The aggregate sales of the holding company and that of the
/turnover subsidiary.
• Sales of H = RM120 m ; Sales of S = RM100 m (include intra-
group sales of RM15 m)
•Group sales = RM 120m + RM 100m - RM 15m = RM 205m
Cost of Group COS:
sales Parent’s COS + Subsidiary’s COS – intra-group purchases –
(COS) URP on opening stock + URP on closing stock

• H = RM 50m; S = RM 40m
• RM 15m of goods from S remain unsold.
• URP = RM 15m x 50/150 = RM 5m
Group COS:
= RM 50m + RM 40m – RM 15m + URP RM 5m
= RM 80m
 Steps to consider:
Operating expenses The additional depreciation on non-current asset of S
as a result of FV adjustment is added to operating
expenses.
•Additional depreciation = RM 4m / 10years
= RM 400k
Group operating expenses:
= RM 20m +RM 20m + RM 0.4m
= RM 40.4 m
Interest expense Interest paid to members of the group is eliminated.
Interest on loan stock of RM 1m is eliminated against
interest income recognized by H of RM400k.
Investment income Comprise of dividends and interest as well as other
income excluding dividends and interest
received/receivable from the subsidiaries. Dividend
from subsidiary is not disclosed.
 Steps to consider:

Taxation Combined total of the holding and subsidiary.

Group taxation:
= RM 15,826m + RM 10.4m
= RM 26,226m

Profit attributable to Portion of PAT of subsidiary after adjusting for group

NCI (W1) adjustments attributable to NCI.
RM’000 RM’000
PAT of S 28,300
Additional dep’n for year 2011 (400)
URP on closing stock (5,000)
Preference dividend (1,440) x 70% 1,008
Due to equity holders 21,460 x 20% 4,292
5,300
 Consolidated SOPL for the year ended 31 Dec 20x4
RM’000
Revenue (120m +100m -15m) 205,000
Cost of sales (50m +40m -15m +5m) (80,000)
Gross profit 125,000
Operating expenses (20m +20m +0.4m) (40,400)
84,600
Interest on loan stock (1m – 0.4m) (600)
Interest expense (0.25m + 0.3m) (550)
83,450
Taxation (15.826m + 10.4m) (26,226)
Total comprehensive income 57,224

Profit after tax attributable to:

Shareholders of H 51,924
Non-controlling interest (W1) 5,300
Total comprehensive income 57,224
Group retained profits b/f:
RM’000 RM’000 RM’000
R. profit of H 25,600
R. profit of S 7,400
(-) pre-acquisition (4,000)
(-) additional depreciation for year 20x3 (400)
3,000 x 80% 2,400
Goodwill impaired (previously) (2,000)
26,000
Non-controlling interest (b/f):
Ordinary shares (RM 15m x 20%) 3,000
Preference shares (RM 10m x 70%) 7,000
Revaluation reserve – NC assets (RM 4m x 20%) 800
Retained profit b/f (RM 7.4m – add. dep’n for year
20x3 of RM400k x 20%) 1,400
12,200
 Steps to consider:
Dividends • Disclosed the parents’ dividends paid.
•Dividends paid to NCI are deducted from the NCI’s retained
profit.
NCI’s: RM‘000_
Preference dividends paid (RM 0.72m x 70%) 504
Ordinary dividends paid (RM 3m x 20%) 600___
^ 1,104__

Extract of the statement of changes in equity

Group retained profits NCI
(RM’000) (RM’000)
b/f 26,000 12,200
Profit for the year 51,924 5,300
Dividends paid (10,000) ^ (1,104)
c/f 67,924 16,396
 Acquisition of subsidiary may take place any time during
the year

 The profits of the subsidiary that will form part of the

current year’s distributable profits of the group will be the
portion of profits earned after it becomes a subsidiary

 The income and expenses of the subsidiary will be

consolidated from the acquisition date

 If preference shares are acquired during the year, the

preference dividends due for the period prior to the
purchase of the preference shares are excluded from the
group’s profit

Refer Example 5 on page 480 of main text

34
 On 1 Jan 20x3, S had the following items in its accounts:
◦ Ordinary shares RM 5m
◦ 14% preference shares RM 1m
◦ Retained profit RM 40k

 On 1 Apr 20x3, H purchased 750,000 of the 1,000,000

issued ordinary shares and 200,000 of the 1,000,000
preference shares of S

 Profits are deemed to accrue evenly throughout the year

 S paid dividends in the period after acquisition.

SOPL for the year ended 31 Dec x3 H (RM) S (RM)
Sales 1,400,000 1,200,000
Cost of sales (800,000) (700,000)
Gross profit 600,000 500,000
Operating expenses (400,000) (220,000)
Operating profit before tax 200,000 280,000
Dividends from S 32.800 -
Taxation (100,000) (130,000)
Profit after tax 132,800 150,000

Retained profit 1 Jan 20x3 20,000 40,000

Ordinary dividend paid 20,000 40,000
Preference dividend paid 10,000 14,000

REQUIRED: Prepare the CSOCI for the group.

W1: Turnover RM Time proportion RM
H 1,400,000
S 1,200,000 x 9/12 900,000
2,300,000
W2: Cost of sales RM Time proportion RM
H 800,000
S 700,000 x 9/12 525,000
1,325,000
W3: Expenses RM Time proportion RM
H 400,000
S 220,000 x 9/12 165,000
565,000
W4: Taxation RM Time proportion RM
H 100,000
S 130,000 x 9/12 97,500
197,500
W5: NCI RM RM RM
PAT of S 150,000 x 9/12 112,500
Preference dividends 14,000 14,000 x 80% 11,200
Due to equity holders 98,500 x 25% 24,625
35,825

W6: RE of group RM RM
Retained profits as per SOPL 132,800
Retained profit b/f 20,000
Dividends paid (10+20) (30,000)
PAT and dividends of S [(150,000x9/12) -54,000] x75% 43,875
176,675
 Statement of profit or loss for the year ended 31 Dec 20x3
RM
Revenue (W1) 2,300,000
Cost of sales (W2) (1,325,000)
Gross profit 975,000
Operating expenses (W3) (565,000)
PBT 410,000
Taxation (W4) (197,500)
PAT 212,500

Profit after tax attributable to:

Shareholders of H 176,675
Non-controlling interest (W5) 35,825
PAT 212,500
NCI measured at proportion of FV of S’s net assets
 Goodwill measured is partial and relate to the parent’s
share only
 Impairment loss on GW will be written off against the
parent’s share of profit

NCI measured at FV of NCI

 Goodwill measured will be full amount and relate to
both the parent and NCI
 Impairment loss on GW will be charged against the
parent’s share of profit and the NCI in proportion to
their equity interest in the S

Example 6 pg 484 of main text (Self-Learning)

40