Financial Reporting and Ethics - The Institute of Chartered ...

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FINANCIAL REPORTING AND ETHICSOn the credit side of the journal are all the components of purchaseconsideration (including liabilities taken over) as contained on the creditside of the new company account in the books of the discontinuingbusinesses.The difference between the debit side and the credit side of the journalrepresents goodwill or capital reserve. If the balancing figure on thejournal is an asset (i.e. debit balance) it is referred to as goodwill. If itis a claim over the assets (i.e. credit balance) it is referred to as capitalreserve.Proforma of the Amalgamation JournalDrCrLand & BuildingXPlant & MachineryXFurniture & FittingsXMotor VehiclesXStocksXDebtorsXGoodwill (balancing figure)XCreditorsXBank overdraftX3% Debenture XOrdinary sharesXPreference shares __ XX XBeing assets and liabilities taken over on amalgamation of A ltd and Bltd to form AB Ltd.N.BIt is instructive to note that the values of individual assets mentionedabove are a combined amount of the takeover values of all thecompanies that amalgamate. The amounts on the credit side of thejournal are also combined figures of each item on the new companyaccount as they appeared in the book of the discontinuing company.All transactions after amalgamation in the book of the new companymust be journalized by means of a simple journal. Such transactionsmay include fresh issue at or above the nominal value.3.7.2 Issue of SharesWhere fresh issues of shares are made for cash, the accounting entrieswill be:28
AMALGAMATION, ABSORPTION AND RECONSTRUCTIONDr - Bank/Cash accountCr - Ordinary share capital account with the nominal valueCr - Share premium account with the premium.After this, the balance sheet of the new company can be prepared.3.7.3 Balance Sheet of the New CompanyThe balance sheet of the new company, after amalgamation is preparedusing the figures from the opening journal subject to adjustments fortransactions after amalgamation as enumerated above.ILLUSTRAUSTRATION TION 3.3The Moon Company Limited and the Rising Star Company Limited haveagreed to amalgamate. A new company Sunshine Company Limitedhas been formed to take over the combined concerns on 31 st January,2009. The Balance sheet of the two companies as at 31 st December,2008 were as follows:The Moon Company LimitedLiabilitiesAssets:Issued and paid up capital: Buildings 50,000N100,000 ordinary shares Machinery 20,000of 1 each 100,000 Stock 26,00015% Debentures 2,000 Debtors 12,000Creditors 6,000 Cash 5,000Unappropriated profit 5,000 _______113,000 113,000The Rising Star Company LimitedLiabilities:Assets:Issued and paid up capital: Buildings 30,0005,000 ordinary shares Machinery 25,000of 10 each 50,000 Goodwill 5,000Creditors 3,000 Stock 3,000Bill payable 2,000 Debtors 2,000General reserves 5,000Retained Earning 5,000 ______65,000 65,000The new company (Sunshine) will take over the assets and liabilities as follows:29
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ANALYSIS AND INTERPRETATION OF FINA
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5ACCOUNTING STANDARDS5.0 LEARNING O
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ACCOUNTING STANDARDS(i)(ii)(iii)(iv
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ACCOUNTING STANDARDSThere is no SAS
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ACCOUNTING STANDARDS5.2.4 Borrowing
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ACCOUNTING STANDARDS(iii)Certain pe
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ACCOUNTING STANDARDSby venture capi
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ACCOUNTING STANDARDSIFRS 7 Financia
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ACCOUNTING STANDARDSactivity, non-c
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ACCOUNTING STANDARDSin the year inc
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ACCOUNTING STANDARDS(v)(vi)(vii)whe
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ACCOUNTING STANDARDS(v)Actions requ
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ACCOUNTING STANDARDSAccounting stud
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6ETHICAL FRAMEWORK, CONCEPTSAND VAL
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ETHICAL FRAMEWORK, CONCEPTS AND VAL
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7THE ENVIRONMENT: CORPORATE,PROFESS
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THE ENVIRONMENT: CORPORATE, PROFESS
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8PROFESSIONAL ETHICS8. 0 LEARNING O
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PROFESSIONAL ETHICSobjectivity are
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PROFESSIONAL ETHICS(c)(d)The type o
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PROFESSIONAL ETHICSabout conflicts
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PROFESSIONAL ETHICS(d)(e)Confidenti
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PROFESSIONAL ETHICSA. III onlyB. II
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9DECISION MAKING IN ETHICS9. 0 LEAR
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DECISION MAKING IN ETHICS9.2 A FRAM
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ETHICAL THREATS AND SAFEGUARDS(d)We
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DECISION MAKING IN ETHICS4. A perso
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10ETHICAL THREATS TS AND SAFEGUARDS
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ETHICAL THREATS AND SAFEGUARDS(iv)(
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ETHICAL THREATS AND SAFEGUARDSto th
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ETHICAL THREATS AND SAFEGUARDSpayab
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ETHICAL THREATS AND SAFEGUARDS(a)Fi
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ETHICAL THREATS AND SAFEGUARDSimmin
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ETHICAL THREATS AND SAFEGUARDSHowev
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ETHICAL THREATS AND SAFEGUARDS(iii)
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11CORPORATE GOVERNANCE11.0 LEARNING
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CORPORATE GOVERNANCE11.3.1 Nature(a
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CORPORATE GOVERNANCEThe company sho
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CORPORATE GOVERNANCEtrust, possible
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CORPORATE GOVERNANCEAn agent has im
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CORPORATE GOVERNANCE(a)(b)(c)(d)(e)
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CORPORATE GOVERNANCE11.6.1 The law
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CORPORATE GOVERNANCEILLUSTRAUSTRATI
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CORPORATE GOVERNANCEimitated. They
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CORPORATE GOVERNANCE(a)(b)Greenbury
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CORPORATE GOVERNANCE11.9.2 Boards d
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CORPORATE GOVERNANCErelationship wi
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CORPORATE GOVERNANCE(e)(f)(g)(h)(i)
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CORPORATE GOVERNANCE(vi)Inquisitive
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CORPORATE GOVERNANCE(e)ConsultancyA
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CORPORATE GOVERNANCEThe incoming au
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CORPORATE GOVERNANCEIn summary, acc
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CORPORATE GOVERNANCEAccording to Th
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CORPORATE GOVERNANCE3. A body corpo
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12SOCIAL AND ENVIRONMENTALISSUES IN
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SOCIAL AND ENVIRONMENTAL ISSUES IN
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APPENDIX ISUGGESTED SOLUTIONS TO RE
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SUGGESTED SOLUTIONS TO REVISION QUE
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SUGGESTED SOLUTIONS TO REVISION QUE
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APPENDIX IICOMPREHENSIVE QUESTIONS
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COMPREHENSIVE QUESTIONS AND SUGGEST
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APPENDIX IIICASE STUDY 1Karsashi, a
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CASE STUDIES(iii)(iv)The floor sale
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CASE STUDIESShare price and dividen
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CASE STUDIESSUGGESTED SOLUTION(A) A
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CASE STUDY 3The following informati
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CASE STUDIESCASE STUDY 4Ologobojo i
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APPENDIX IVTable 1:SUMMARY OF INTER
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SUMMARY OF INTERNATIONAL ACCOUNTING
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APPENDIX VGLOSSARY OF TERMSAbsorpti
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GLOSSARY OF TERMSEthical Objectivis
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APPENDIX VIBIBLIOGRAPHYChambers Ham
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APPENDIX VIISTUDY AND EXAMINATION T
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STUDY AND EXAMINATION TECHNIQUES7.3
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INDEXAAbsorption, 17, 19, 39, 40, 4
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INDEXProfessional Behaviour, 136, 1
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