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+--- Thread: Pre - and post acquisition analysis (/showthread.php?tid=7383)
Pre - and post acquisition analysis - hinanifaf - 02-11-2010
Namib Income statement and two entities in which it holds investments year ended 31 January 2010.
Namib'000 Poly'000 Unam'000
Revenue 1800 1400 600
Cost of sales (1200) (850) (450)
Gross Profit 600 550 150
Operating expenses 449 375 72
Profit from operation 151 175 78
Finance cost 16 12 -
Interest income 6 - -
Profit before tax 141 163 78
Income tax expense 46 53 28
Profit for the year 95 110 50
Note 1 - Investments by Namib
In 2008,Namib acquired 70% of the issued ordinary share capital of Poly and on 31 October 2009 two thirds of Unam was bought.The directors of Namib have decided to adopt an appropriate policy of consolidation as permitted by IFRS.
Note 2 - Poly's Borrowings
During the financial year ended 31 January 2010,Poly paid the full amount of interest due on its 6% debenture loan of 200000.Namib acquired half of the debenture when it was issued three years ago.
Note 3 - Unam's performance
One third of Unam 's sales were earned during the last quarter of the year.Operating expenses accrued evenly throughout the year.
Note4 - Intra-group trading
During the ,Poly sold goods to Namib for 100 000.No such goods were in Namib's warehouse at the year end.
How will i prepare my pre-and post acquisition analysis of each item, for Unam income statement,and how will the consolidated income statement for Namib group look.
Many thanks
- Dard - 02-11-2010
Since you only asked about Unam, there is only one note related to it
Note3
In consolidation, only 200,000/- revenue will be consolidated. Other Post acquisition figures of the items in the income statement will be 3/12 of the values
- hinanifaf - 02-11-2010
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Dard</i>
<br />Since you only asked about Unam, there is only one note related to it
Note3
In consolidation, only 200,000/- revenue will be consolidated. Other Post acquisition figures of the items in the income statement will be 3/12 of the values
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Thanks for that,now tell me Poly share will be calculated only on 30%,and Unam 3/12 of each item, to be included in the Namib group income statement- am i correc on that except the 1/3 revenue amount?
Thanks
- Dard - 02-12-2010
The Parent's share in Poly is 70%, not 30%. The 30% and 1/3 mentioned by you is the non-controlling interest percentage, not the parent's share. We will not take all the figures and multiply by them with 70% or 2/3. Instead we will take 100% of all the figures and then deduct Non-controlling-Interest from the profit for the year. Also Anum has been subsidiary just for 3months, therefore, only 3months figures of all items will be taken for consolidation(except revenue which is 1/3 of total revenue)
- eima - 02-24-2010
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Dard</i>
<br />Since you only asked about Unam, there is only one note related to it
Note3
In consolidation, only 200,000/- revenue will be consolidated. Other Post acquisition figures of the items in the income statement will be 3/12 of the values
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
- eima - 02-24-2010
actually, i want to know what means pre - and post acquisition and why pre-acquisition income of the subsidiary is treated differently from post-acquisiton income. I'm very confuse. help me....[B)]
- Dard - 02-25-2010
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by eima</i>
<br />actually, i want to know what means pre - and post acquisition and why pre-acquisition income of the subsidiary is treated differently from post-acquisiton income. I'm very confuse. help me....[B)]
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
The purpose of the consolidated Statement of comprehensive income is to show the financial performance of the group as a whole for the year. As the consolidated Statement of comprehensive income is prepared after control has been acquired by the Parent company and the group came into existance after the control was acquired, all the figures of the Statement of comprehensive income must be of post-acquisition, ie after control has been acquired.
Since the subsidiary was not controlled by the parent company before the acquisition, the pre-acquisition incomes and expenses will not be included in the consolidated statement of comprehensive income
- eima - 02-26-2010
Can anyone help me??? Can you explain why is it important to categorise the reserves of the subsidiary company into "pre-acquisition reserves" and "post-acquisition reserves" for purposes of consolidation? What do you think could happen if no such distinction is required in consolidation?
- Dard - 02-27-2010
Pre acquisition means before acquisition and Post acquisition means after acquisition. It is important to categorise them because the parent company gains control of the its subsidiary company after acquisition. The purpose of the consolidated statement is to show to performance of the group as a single economic unit. Before acquisition, the group did not exist, therefore pre-acquisition figures will not be included