Gourmet Products Inc: Preparing Gpi’s Consolidated Financial Statements
Question 1
REPORT
Date: October 16, 2015
To: Ed Moore, CEO, Gourmet Products Inc
From: Asif Majarani, CGA, Senior Audit Manager, Majarani Associates
Subject: Adjustments and other issues needed to be considered in preparing GPI’s consolidated financial statements.
We are pleased to be selected to perform an audit engagement for the third consecutive year. As a follow-up of our meeting I prepared this report to outline: the adjustments required prior the consolidation of the financial statements, due to acquisition of Abruzzi Oils Inc, and to provide recommendations for other related GPI issues.

Adjustments required for the preparation of Gourmet Products Inc consolidated financial statements:
Consolidated financial statements:
GPI is a public company consequently must comply with IFRS. By purchasing 100% of Abruzzi shares, GPI enters into a business combination with Abruzzi because it has full control over Abruzzi. GPI is the parent company and Abruzzi is the subsidiary, therefore

Abruzzi financial statements must to be consolidated with GPI’s financial statements.
As per IFRS 10, GPI has to prepare consolidated financial statements. The objective of consolidated financial statements is to report on the subsidiary’s resources which are controlled by the parent as well as on the risk exposures and rewards associated this subsidiary’s resources. In the consolidated financial statements GPI has to remove the “investment in Abruzzi” and to replace the investment with Abruzzi assets and liabilities. GPI has to keep track during the year of the changes in the investment account by using either the cost or equity method, at initial acquisition the investment account is the same under both methods.

The consolidation method eliminates the all the intercompany transaction as well as the foreign currency transactions. The Consolidated Statement of Financial Position does include the accumulated unrealized exchange gains or losses for all the years to date. The consolidated Income Statement will include current year unrealized exchange gains or losses.

Additionally, IFRS requires disclosure regarding acquisitions. This will be done in notes of consolidated financial statements. In the notes disclosure we will have to includes name of subsidiary and a brief description of the acquisition, the date of acquisition, the percentage of voting shares purchased, the fair value at acquisition for each major category and total consideration transferred, any contingent consideration, as well as the functional currency,

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