a) What is the basis for consolidation of a group of companies? What financial statements are required for a corporate group? What, if any, transactions within a group should be excluded from group financial statements?

b) Information: On January 1, 2015 Major Inc acquired 70 per cent of the share capital of Minor Inc, a market competitor, for US $500,000. At the date of acquisition, the net assets of Minor Inc had a fair value that exceeded book value by $100,000. The individual balance sheets of the two companies are set out below.

                             Major              Minor                      

    USD                 USD

Assets

Non-current assets   $1,000,000 $200,000

Investment in S   500,000

Net current assets   20,000 10,000

Net assets   1,520,000 210,000

Ordinary share capital $1   1,000,000 150,000

Retained earnings   520,000 60,000

    1,520,000 210,000