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Practical caseIAS 7L4 · Expert

Acquisition of a subsidiary, disposal of another and purchase of non-controlling interests: group cash flows

6 documents10 tasks≈ 90 min
0 / 14 items completed
Standards
IAS 7 — Statement of Cash Flows
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

The Malvoisine group (fictitious entity) distributes medical equipment. In 20X8 it acquired Galmier SAS, disposed of Malvoisine Ibérica, bought interests in Malvoisine Services and subscribed to a capital increase of its associate Fontanes. The draft consolidated statement needs review.

Your assignment

Prepare the group lines of the consolidated statement and the related note, justifying classifications and amounts. One item of information is missing.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Autonomous professional situation

As on a real engagement: no method, no checklist and no hints. You identify the issues yourself, organise the work and defend your conclusion.

  • Organise the work
  • Document each point
  • Argue the conclusion

Documents

File documents

6 documents: open each one to read it.

Document 1Contract

Acquisition note for Galmier SAS

Galmier SAS, 100 % acquired on 30 September 20X8: total consideration 4,200,000, i.e. 3,000,000 paid in cash on the acquisition date and 1,200,000 settled in new shares of the parent. Galmier's provisional balance sheet at that date (EUR): cash and cash equivalents 380,000; property, plant and equipment 2,100,000; inventories 950,000; trade receivables 700,000; borrowings 1,100,000; trade payables 630,000; goodwill 1,800,000 (IFRS 3, not mapped: amounts given by the case).

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Total consideration€4,200,000.00
Portion paid in cash€3,000,000.00
Portion settled in new shares€1,200,000.00
Galmier's cash when control was obtained€380,000.00
Property, plant and equipment acquired€2,100,000.00
Inventories acquired€950,000.00
Trade receivables acquired€700,000.00
Borrowings assumed€1,100,000.00
Trade payables assumed€630,000.00
Total consideration€2,000,000.00
Portion received in cash€1,800,000.00
Deferred consideration receivable in 20X9€200,000.00
Subsidiary's cash at the disposal date€260,000.00
Property, plant and equipment disposed of€900,000.00
Inventories disposed of€400,000.00
Trade receivables disposed of€350,000.00
Trade payables disposed of€300,000.00
Price paid to the non-controlling shareholders€450,000.00
Equity-accounted amount at the beginning€1,250,000.00
Share of profit€210,000.00
Subscription to a capital increase€100,000.00
Equity-accounted amount at the end€1,430,000.00
Loan drawn to finance the acquisition€1,600,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort6

  • Acquisition note for Galmier SAS

  • Disposal agreement for Malvoisine Ibérica

  • Board minutes: purchase of interests in Malvoisine Services

  • Movements in the investment in Fontanes

  • Acquisition loan agreement

  • Press release

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

      Organise your work freely: deal with each point, then argue your conclusion.

      1. Task 1Analysis

        Analyse the group transactions of the period.

      2. Task 2Calculation

        Compute the cash flow from acquiring Galmier.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the cash flow from acquiring Galmier.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Calculation

        Compute the cash flow from disposing of Malvoisine Ibérica.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the cash flow from disposing of Malvoisine Ibérica.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Compute the dividends received from Fontanes.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the dividends received from Fontanes.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Professional judgement

        Classify the transactions and identify the pitfalls of the consolidated statement.

      6. Task 6Analysis

        Present the group lines of the statement.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Present the group lines of the statement.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Total group lines in financing

      7. Task 7Journal entries

        Present the entry for the acquisition loan.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      8. Task 8Effects on the financial statements

        What is its effect?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Analysis

        Prepare the note on obtaining and losing control.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Prepare the note on obtaining and losing control.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Malvoisine Ibérica's net assets disposed of

      10. Task 10Conclusion

        Write the conclusion.

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 14).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 7 §37
      • IAS 7 §38
      • IAS 7 §39
      • IAS 7 §40
      • IAS 7 §41
      • IAS 7 §42
      • IAS 7 §42A
      • IAS 7 §42B