FAGC Revision Notes - Essay plan., Essays (university) of Financial Accounting

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3/6/25, 6:33 PM FAGC Revision Notes - Essay plan Financial Accounting for Groups & Companies Revision Notes. -c eae Why do companies combine? - Growth of the business © Added assets © Established business in existing markets, customers - Economies of Scale - Elimination or reduction of competition (Craft and Cadbury have ‘more power combined to compete with Nestlé) Buy supplier/customer (Facebook acquired 66 companies from 2005 onwards to acquire different aspects of businesses) - Take-over or acquisition © Buy out of shares, - Merger/Uniting of Interests ‘© Businesses share control © Can be controlled by EU law linked to unfair competition ~ Joint ventures ‘0 Ran jointly by two or more businesses equally Underlying Concept of a combination __ - Parent company concept ‘© Company buys shares in a business making this a subsidiary = Control ‘© The level of control held dictates the consolidation of the business accounts - Significant influence © This occurs when there is not full control, this leads to equity accounting - Legal control v Economic control ‘0 Who owns the shares legally? (© The spread of ownership can lead to control being dispersed Categories of Investment: __ ‘Non-Controlling Interest = <20% shares held = Classed as an Ordinary or simple investment - No consolidation - Non-controlling influence is not consolidated and is known as a simple investment and taken to the SOFP ‘© DR Investment Asset about:blank 1/42