Ch4. ACCA — Financial Reporting (FR): Consolidated Accounts & IFRS

Key IFRS Standards — In Depth

IFRS 15: Revenue Recognition (5-Step Model)

1. Identify the contract with a customer
2. Identify performance obligations (distinct goods or services)
3. Determine the transaction price (including variable consideration)
4. Allocate to performance obligations (based on standalone selling prices)
5. Recognise revenue when (or as) performance obligations are satisfied

IFRS 16: Leases

All leases on-balance-sheet for lessees:

• Right-of-Use (ROU) Asset: Present value of future lease payments
• Lease Liability: Present value of future lease payments
• Exceptions: Short-term leases (≤12 months), low-value assets

IFRS 9: Financial Instruments — Classification

Category	Measurement
Amortised Cost (AC)	Effective interest rate method
FVOCI	Fair value; gains/losses to OCI
FVTPL	Fair value; gains/losses to P&L

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Consolidated Financial Statements

Control Under IFRS 10

Control = Power + Exposure to variable returns + Ability to use power to affect returns

Generally: > 50% voting rights = control (with some exceptions)

Consolidation Procedure

1. Add parent and subsidiary assets/liabilities (100%)
2. Eliminate intragroup transactions (loans, sales, dividends)
3. Cancel investment against subsidiary’s equity at acquisition
4. Calculate and recognise goodwill
5. Recognise Non-Controlling Interest (NCI)

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Goodwill Calculation

Goodwill = Consideration transferred + NCI − Fair value of net assets acquired

Example:

• Parent pays $1,000 for 80% of Subsidiary
• FV of subsidiary net assets: $1,100
• NCI (fair value method): 20% × $1,250 =$250
• Goodwill = $1,000 +$250 − $1,100 = **$150**

NCI Measurement Methods

1. Fair value method: NCI at its fair value (goodwill includes NCI share)
2. Proportionate method: NCI = Net assets × NCI % (goodwill = parent’s share only)

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ACCA FR Exam Priorities

Topic	Key Point
IFRS 15	5-step model application
IFRS 16	ROU asset and lease liability calculation
Consolidation	Goodwill and NCI calculation
Associate (equity method)	20–50% holding; share of post-acquisition profit
Foreign currency	IAS 21 translation rules

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