What are the benefits of having a group account?

Consolidated statements allow investors, financial analysts, business owners and other interested

parties to get a complete overview of the parent company. They can view the overall health of the

business and how each subsidiary impacts the parent company.

It also reduces paperwork because if parent company owns lots of subsidiaries, there would be a lot

of separate financial reports including income statements, balance sheets etc. This results in less

effort being expended to assess a parent company’s financial health.

Group accounts will take out all the intra company transactions, cancelling it out and simplifying the

reports.

Increases transparency and understandability of the statements, allowing better analysis of a

company’s financial condition.

The only problem is that group accounts can be manipulated to hide unfavourable results.

Without group accounts, the process of evaluation for companies for investment or financing would

be more complex.

Provides comparable information, allowing comparative analysis to become an easier task for

investors.

Allows an assessment of risks and benefits of company.

Improved accountability

Provision of security

Disposals

Methods of calculating goodwill

The proportionate method of calculating goodwill is the excess of the fair value of the consideration

given by the parent over the parent’s share of the fair value of the net assets acquired.

Another method is to compare the fair value of the whole of the subsidiary as represented by the fair

value of the consideration given by the parent and the fair value of the non controlling interest with

all of the fair value of the net assets of the subsidiary acquired. This is known as the full goodwill

method.

What are the benefits of having a group account

Financial Accounting 3 (MANG3003)