Consolidation Journal Entries
Fair Value of Consideration (IN P's BOOKS)
a. Remeasure gain or loss before transfer of asset
Dr / Cr Asset
Cr / Dr Gain / Loss on remeasurement (P/L)
c. Expenses
Dr Valuation and due diligence fee
Dr Cost of issuing equity
Dr Debt issuance costs / Unamortised debt issuance costs
Cr Cash
d. Loans
Dr Loan payable
Cr Cash
e. Journal entry
Investment in S
Dr Unamortised discount on DC *
Dr Unamortised discount on CC *
Cr Assets transferred
Cr Cash
Cr Equity issued
Cr Deferred consideration (Full amount)
Cr Contingent Consideration (Full amount)
*USE cost of capital of the payer of the consideration
f. Recognisation of Interest expense on DC/CC
Dr Interest expense
Cr Unamortised discount on DC/CC
Elimination of investment in X
Dr Share capital
Dr Retained earnings
Dr Revaluation reserve
Dr Goodwill
Dr Any FV differential of assets/ liabilities
Dr Deferred tax asset
Cr Any FV differential of assets/ liabilities
Cr Investment in S
Cr Non-controlling interests
Cr Deferred tax liability
Cr Gain on bargain purchase
, Post-acq RE
Dr Beginning retained earnings (1 Jan - acq date)
Cr NCI (B/S)
Post-acq Revaluation Reserve
Dr Beginning retained reserves
Cr NCI (B/S)
Fair Value Differential (FVD) - Fixed Assets / Other Assets
a. Depreciation of FVD
i. PRIOR YEAR Depreciation of excess FV over BV of asset
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Accumulated depreciation
Dr Deferred tax liability
Cr Beginning retained earnings
Cr NCI (B/S)
ii. CURRENT YEAR Depreciation of excess FV over BV of asset
Dr Depreciation expense
Cr Accumulated depreciation
Dr Deferred tax liability
Cr Tax expense
b. If the asset is sold,
i. PRIOR YEAR sale of asset
Dr Accumulated depreciation
Dr/ Cr Beginning retained earnings
Dr/ Cr NCI (B/S)
Cr Asset
Dr/ Cr Deferred tax liability
Cr/ Dr Beginning retained earnings
Cr/ Dr NCI (B/S)
ii. CURRENT YEAR sale of asset
Dr Accumulated depreciation
Dr Loss/ Cr Gain
Cr Asset
Dr/ Cr Deferred tax liability
Cr/ Dr Tax expense
, Fair Value Differential (FVD) - Inventory
a. If there are impairment of inventory
i. PRIOR YEAR impairment of inventory
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Accumulated impairment/ Inventory
Dr Deferred tax liability
Cr Beginning retained earnings
Cr NCI (B/S)
ii. CURRENT YEAR impairment of inventory
Dr Impairment loss (P/L)
Cr Accumulated impairment/ Inventory
Dr Deferred tax liability
Cr Tax expense
b. If the inventory is sold,
i. PRIOR YEAR sale of inventory (to external parties)
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Inventory
Dr Deferred tax liability
Cr Beginning retained earnings
Cr NCI (B/S)
ii. CURRENT YEAR sale of inventory (to external parties)
Dr Cost of goods sold
Cr Inventory
Dr Deferred tax liability
Cr Tax expense
Fair Value Differential (FVD) - Contingent Liability
a. If S incurs contingent liability and recorded in its books
i. PRIOR YEAR S recorded in its books
Dr Contingent liability
Cr Beginning Retained Earnings
Cr NCI
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Deferred tax liability
, ii. CURRENT YEAR S recorded in its books
Dr Contingent liability
Cr Expense
Dr Tax expense
Cr Deferred tax liability
b. If S incurs contingent liability and it is already settled
i. S settlement of liability
Dr Contingent liability
Cr Beginning retained earnings
Cr NCI (B/S)
Dr NCI (B/S)
Dr Beginning retained earnings
Cr Deferred tax liability
Goodwill
a. PRIOR YEAR Impairment on goodwill (No tax effect)
Dr Beginning retained earnings
Dr NCI (B/S) [Only if NCI is recognised at FV on acq date]
Cr Goodwill or Accumulated impairment
b. CURENT YEAR Impairment on goodwill (no tax effect)
Dr Impairment of Goodwill (P/L)
Cr Goodwill or Accumulated impairment
Intragroup Transactions - Inventory
a. Downstream sale of inventory (will NOT affect NCI)
i. Eliminate PRIOR YEAR unrealised profit/loss
Dr / Cr Beginning retained earnings
Cr / Dr Inventory (unrealized)
Dr Deferred tax asset / Cr Deferred tax liability
Cr / Dr Beginning retained earnings
ii. Realisation of PRIOR YEAR unrealised profit/loss in CURRENT YEAR
Dr / Cr Inventory
Cr / Dr Cost of sales (P/L)
Dr / Cr Tax expense
Cr Deferred tax asset / Dr Deferred tax liability
iii. Eliminate CURRENT YEAR unrealised profit/loss
Dr Sales
Cr Cost of sales
Cr / Dr Inventory
Dr Deferred tax asset / Cr Deferred tax liability
Cr / Dr Tax expense
Fair Value of Consideration (IN P's BOOKS)
a. Remeasure gain or loss before transfer of asset
Dr / Cr Asset
Cr / Dr Gain / Loss on remeasurement (P/L)
c. Expenses
Dr Valuation and due diligence fee
Dr Cost of issuing equity
Dr Debt issuance costs / Unamortised debt issuance costs
Cr Cash
d. Loans
Dr Loan payable
Cr Cash
e. Journal entry
Investment in S
Dr Unamortised discount on DC *
Dr Unamortised discount on CC *
Cr Assets transferred
Cr Cash
Cr Equity issued
Cr Deferred consideration (Full amount)
Cr Contingent Consideration (Full amount)
*USE cost of capital of the payer of the consideration
f. Recognisation of Interest expense on DC/CC
Dr Interest expense
Cr Unamortised discount on DC/CC
Elimination of investment in X
Dr Share capital
Dr Retained earnings
Dr Revaluation reserve
Dr Goodwill
Dr Any FV differential of assets/ liabilities
Dr Deferred tax asset
Cr Any FV differential of assets/ liabilities
Cr Investment in S
Cr Non-controlling interests
Cr Deferred tax liability
Cr Gain on bargain purchase
, Post-acq RE
Dr Beginning retained earnings (1 Jan - acq date)
Cr NCI (B/S)
Post-acq Revaluation Reserve
Dr Beginning retained reserves
Cr NCI (B/S)
Fair Value Differential (FVD) - Fixed Assets / Other Assets
a. Depreciation of FVD
i. PRIOR YEAR Depreciation of excess FV over BV of asset
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Accumulated depreciation
Dr Deferred tax liability
Cr Beginning retained earnings
Cr NCI (B/S)
ii. CURRENT YEAR Depreciation of excess FV over BV of asset
Dr Depreciation expense
Cr Accumulated depreciation
Dr Deferred tax liability
Cr Tax expense
b. If the asset is sold,
i. PRIOR YEAR sale of asset
Dr Accumulated depreciation
Dr/ Cr Beginning retained earnings
Dr/ Cr NCI (B/S)
Cr Asset
Dr/ Cr Deferred tax liability
Cr/ Dr Beginning retained earnings
Cr/ Dr NCI (B/S)
ii. CURRENT YEAR sale of asset
Dr Accumulated depreciation
Dr Loss/ Cr Gain
Cr Asset
Dr/ Cr Deferred tax liability
Cr/ Dr Tax expense
, Fair Value Differential (FVD) - Inventory
a. If there are impairment of inventory
i. PRIOR YEAR impairment of inventory
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Accumulated impairment/ Inventory
Dr Deferred tax liability
Cr Beginning retained earnings
Cr NCI (B/S)
ii. CURRENT YEAR impairment of inventory
Dr Impairment loss (P/L)
Cr Accumulated impairment/ Inventory
Dr Deferred tax liability
Cr Tax expense
b. If the inventory is sold,
i. PRIOR YEAR sale of inventory (to external parties)
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Inventory
Dr Deferred tax liability
Cr Beginning retained earnings
Cr NCI (B/S)
ii. CURRENT YEAR sale of inventory (to external parties)
Dr Cost of goods sold
Cr Inventory
Dr Deferred tax liability
Cr Tax expense
Fair Value Differential (FVD) - Contingent Liability
a. If S incurs contingent liability and recorded in its books
i. PRIOR YEAR S recorded in its books
Dr Contingent liability
Cr Beginning Retained Earnings
Cr NCI
Dr Beginning retained earnings
Dr NCI (B/S)
Cr Deferred tax liability
, ii. CURRENT YEAR S recorded in its books
Dr Contingent liability
Cr Expense
Dr Tax expense
Cr Deferred tax liability
b. If S incurs contingent liability and it is already settled
i. S settlement of liability
Dr Contingent liability
Cr Beginning retained earnings
Cr NCI (B/S)
Dr NCI (B/S)
Dr Beginning retained earnings
Cr Deferred tax liability
Goodwill
a. PRIOR YEAR Impairment on goodwill (No tax effect)
Dr Beginning retained earnings
Dr NCI (B/S) [Only if NCI is recognised at FV on acq date]
Cr Goodwill or Accumulated impairment
b. CURENT YEAR Impairment on goodwill (no tax effect)
Dr Impairment of Goodwill (P/L)
Cr Goodwill or Accumulated impairment
Intragroup Transactions - Inventory
a. Downstream sale of inventory (will NOT affect NCI)
i. Eliminate PRIOR YEAR unrealised profit/loss
Dr / Cr Beginning retained earnings
Cr / Dr Inventory (unrealized)
Dr Deferred tax asset / Cr Deferred tax liability
Cr / Dr Beginning retained earnings
ii. Realisation of PRIOR YEAR unrealised profit/loss in CURRENT YEAR
Dr / Cr Inventory
Cr / Dr Cost of sales (P/L)
Dr / Cr Tax expense
Cr Deferred tax asset / Dr Deferred tax liability
iii. Eliminate CURRENT YEAR unrealised profit/loss
Dr Sales
Cr Cost of sales
Cr / Dr Inventory
Dr Deferred tax asset / Cr Deferred tax liability
Cr / Dr Tax expense
