ACG 6257 Florida Gulf Coast University Financial Statement Disclosures Worksheet The answers should be completed on the same word document attached. Debits

ACG 6257 Florida Gulf Coast University Financial Statement Disclosures Worksheet The answers should be completed on the same word document attached. Debits and Credits must have names of accounts as well as the amounts that are being debited and credited. Some blanks have already been filled in to keep us on track. The attached PDF has all the information necessary to complete this task. most of the information will be found on pages 3 & 4 of the PDF file. The second page of the PDF file can be disregarded since it does not contain useful information. Case 2 Instructions and Tips
Instructions:
Required – Make all journal entries indicated for FY 2012 using pages 3 and 4. Observe that positive R/E and Reserve numbers are
credits and negative numbers are debits to R/E and Reserves. Your analyses must show the accounts that are Credited and Debited
against the DRs and CRs made in the R/E account and in the OCI Reserve accounts.
This is a critical analysis and thinking case that requires you to analyze incomplete information and synthesize a solution drawing
upon mostly Intermediate Accounting knowledge and information gained from the IFRS text. The MSWord file email attachment
should be one page (the last page completed).
General Tips:
There are some complicated analyses and entries involved. That is why I will give you as much detail as possible without giving away
all of the answers. In addition, I will make some of the most complicated entries concerning subsidiaries and joint ventures because I
do not cover these chapters in the IFRS textbook.
Carefully read the first page of the case down to the bold heading of “Rights and restrictions….”. Compute the overall changes in the
Stockholders’ Equity (SE) accounts and you will gain much insight into the details of these changes as you continue your analyses.
Some detail is given below the SE section statement where you see the share capital changed but the change was not significant
enough to show up in numbers that were in millions of dollars (5+ million shares at 10 cents par did not make a dent in 166 – it was
166 rounded up last Dec. 31 and it is 166 rounded down this Dec. 31).
When you read the next two sections, you can see where the change in share premium is originating from – they issued stock for $96m
which was entirely booked to share premium. Skip to page 3 to the R/E details which is a wonder of reporting. It is a combined report
of OCI changes concerning:
1) the Parent’s share of the losses of Associates/JVs that were reported in their own OCI;
2) the Pension items that should be reported in OCI; and
3) the Treasury Stock account.
The net change in all of these is an increase of $2,872m.
Note: US GAAP prohibits the use of “reserves”, requires OCI for the year and AOCI be reported in a separate section of SE, requires
that actuarial changes in Pension assets/liabilities be reported in OCI, and requires that T/S be deducted from total SE as the last item
of the SE statement.
Finally, read the first two paragraphs on top of page 4, under the heading Treasury and EBT shares reserves. This explains why they
deduct T/S directly from R/E.
Specific Tips:
A. Profit for the year is “Comprehensive Income” which is the sum of Net Income and Other Comprehensive Income. Net Income is
4,221 and OCI is (22) and must be shown separately from R/E in the SE section of the balance sheet. (see: p. 3; R/E column, year
starting with March 31, 2011).
Where is (22) coming from? On page 4, analyze the changes in the OCI reserves – there is a net of 97 credit increase in all 4 reserves,
not including Pension reserves (1881 increased to 1978). The -9 in the box on page 3 for pensions is a part of OCI but it is handled
without using reserves and is a debit to R/E directly. I have no idea why – must be industry practice – see private joke below. All other
real OCI items are accounted for in Reserves (four of them) and are shown on page 4 of the case. Then, what is OCI -119 (a debit to
R/E)? Well, they took their share of the losses that associates and joint ventures reported in the OCI of their own financial statements,
net of deferred tax debits/assets (these are not tax deductible so they create future deductible amounts – that is deferred tax assets) and
booked them in the R/E account as an OCI item. I have no idea why. – must be industry practice – see private joke below. So, the OCI
for the year ending March 31, 2012, if separately reported, would show:
Actuarial Loss: Increase in PBO
SAB Miller’s share of OCI losses reported by Assoc./JVs – net of deferred taxes of 71
Net foreign currency translation gains
Loss: Net decline in the FV of cash flow hedges recognized by SAB Miller (gain of 6)
and Associates/JVs (loss of 75) net of 30 deferred taxes
Loss: Decline in value of net investments in subsidiaries
OCI
(9)
(110)
137
(39)
(1)
(22)
The private joke – I asked one of the European managing partners of KPMG (workshop leader) who was circulating in the room. He
gave me a serious look and he said (with a straight face): “industry practice”. Since the CI = NI + OCI statement and the SE section of
the balance sheet are not available, we cannot see the total picture.
Note1 – the box describes the accounts involved and it is not an entry – numbers do not represent debits/credits. Along with the
separately shown Reserves on the next page, it substitutes for the requirement that OCI be separately reported.
Note2 – the signs are reversed in the box, that is, 71 is a debit to deferred tax asset that materializes when losses are not tax deductible
and create future deductible amounts. Thus, -9 is a loss and it represents an increase (Cr.) in the PBO liability; -181 represents a loss
and a decline (Cr.) in Investment in Associates/JVs account; finally, 71 represents an increase (Dr.) in a deferred tax asset).
C. You must name the accounts debited/credited and show the net change in each reserve. See item E below for examples.
D. So, based on those educated guesses, I made a few entries to start you on the right path. Finish the entries below (complete the
missing names and amounts).
E. To show you how increases (decreases in OCI Reserves create counterbalancing accounts (Dr/Cr), I made the entries for the two
most complicated Reserves:
Foreign Currency Translation Reserve (an OCI account):
Dr. Investment in Foreign Subs.
Cr. Investment in Assoc. and JVs
Cr. OCI – Net FC Translation Gains
Cash Flow Hedging Reserve (an OCI account):
Dr. OCI – Net Cash Flow Hedge Loss
Dr. DT Asset
Dr. Allowance for Increase in FV of Cash Flow Hedge (pro-asset)
Cr. Investment in Associates and JVs
243
106
137
39
30
6
75
F. Make the remaining entries in (I made a few random parts of entries to keep you on the path):
Net Investment Hedge:
Dr. OCI – Net Investment Hedge Loss
Cr.
1
T/S Column (second entry here also impacts R/E):
Dr.
Cr.
Dr.
Cr.
The R/E Column:
Dr. R/E
Dr. Deferred Tax (39% of 181)
Cr. Investment in Associates/JVs
Dr. R/E (Actuarial Loss – should be a Dr. to OCI)
Cr. Projected Pension Obligation
110
71
181
9
9
Dr.
Cr.
1324
1324
Dr.
Cr. Investment in Associates and JVs (Investment diluted)
Dr.
Dr. Investment in Subsidiaries (FV)
Cr. Cash (buyout amount created an excess over FV that is not Goodwill)
Dr.
Dr.
5
X
Y
Cr. R/E (find out how R/E can be credited when shared-based payments are involved)
Not Required –
Dr. Cash
Cr. Share Premium
Cr. Share Capital
Dr. Dozens of accounts (consolidation eliminations)
Cr. Dozens of accounts (consolidation eliminations)
Cr. NCI (noncontrolling interests)
158
96
96
negligible
XX
YY
189

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