Corporate Reporting
Corporate Reporting tests whether you can apply SLFRS (Sri Lanka Financial Reporting Standards, aligned with IFRS) to prepare, consolidate and interpret general-purpose financial statements, and explain disclosure judgements.
Core rules
- SLFRS 10: consolidate when control exists (power over relevant activities, exposure to variable returns, ability to use power to affect returns). Significant influence is LKAS 28, not consolidation.
- SLFRS 3: measure consideration and identifiable net assets at acquisition-date fair value; recognise goodwill or a gain from a bargain purchase. NCI may be measured at fair value or proportionate share of identifiable net assets.
- SLFRS 15: recognise revenue over time or at a point in time using the five-step model; allocate transaction price to distinct performance obligations.
- SLFRS 9: classify financial assets by business model and contractual cash-flow characteristics; impairment uses expected credit losses.
- LKAS 12: recognise deferred tax on temporary differences, including fair value adjustments in consolidation, subject to initial-recognition exceptions.
Worked example
Parent buys 80% of Subsidiary for LKR 900m. Subsidiary’s identifiable net assets have fair value LKR 1,000m. NCI at proportionate share is LKR 200m. Goodwill = 900 + 200 − 1,000 = LKR 100m. If NCI is measured at fair value of LKR 240m, goodwill = 900 + 240 − 1,000 = LKR 140m. The higher goodwill is not automatically better; it reflects the NCI measurement choice and must be tested for impairment.
Traps
Using carrying amounts instead of acquisition-date fair values; forgetting deferred tax on fair value uplifts; eliminating only intra-group balances but not unrealised profit; treating significant influence as control; and confusing revenue recognition with cash collection.