CONSILIDATION, PROPORTIONATE CONSOLIDATION AND EQUITY METHOD

ISA 600, paragraph 10 states that the “consolidation process” includes presentation’ and disclosure of the financial information of the components in the group financial statements by way of:
– consolidation,
– proportionate consolidation, or
– the equity methods of accounting.

The above methods are explained as under:

H Limited acquired 60% interest in S Limited on Jan I, 20×4 when the retained earnings S were Rs. 1,000

Separate financial statements of H and S at December 31, 20×6 are:

Income statement for year ended December 31, 20×6

Goodwill is to be amortized over a period of five years. The amortization approximately equals impairment of goodwill.

Required
Prepare group financial statements, in columnar consolidation
Solution
Income statement, December 31, 20×7

Statement of Financial Position

or

2. RESPONSIBILITIES OF GROUP ENGAGEMENT PARTNER
AND GROUP ENGAGEMENT TEAM

Responsibilities of group engagement partner and group engagement team include:

(a) Acceptance and Continuance
(b) Overall Audit Strategy and Audit Plan
(c) Understanding of the Group, its component and their Environment
(d) Understanding of Component Auditor
(e) Materiality Level
(f) Responding to Assessed Risks
(g) Communication with component auditor