Company Accounts

🟢 Lite — Quick Review (1h–1d)

Rapid summary for last-minute revision before your ICAN exam. Company Accounts is the preparation of financial statements for Nigerian limited liability companies under CAMA 2020 (Sections 374–382), the FRCN Act 2011, and IFRS-compliant statements. The full set comprises the Statement of Profit or Loss and Other Comprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of Cash Flows, and the Notes to the Accounts — also produced on a consolidated basis for groups under IFRS 10.

Goodwill = Cost of Investment − Fair value of acquirer’s share of identifiable net assets acquired.
NCI at fair value = NCI% × Fair value of subsidiary’s identifiable net assets at acquisition date.
Basic EPS = Profit attributable to ordinary shareholders ÷ Weighted-average ordinary shares outstanding.
Proposed dividends are NOT a liability at year-end — disclose as a post-reporting event note under IAS 10.
Redeemable preference shares are a liability under IAS 32, not equity.

🟡 Standard — Regular Study (2d–2mo)

Standard content for students with a few days to months.

Statutory Framework and Presentation

CAMA 2020 Sections 374–382 require every Nigerian limited liability company to prepare financial statements that give a true and fair view, follow prescribed formats, and are signed by at least two directors. Group accounts are mandatory when a parent controls a subsidiary (IFRS 10). The primary statements are the P&L (or P&L + OCI in two-statement format), the Statement of Financial Position (current/non-current distinction), the Statement of Changes in Equity, the Cash Flow Statement (IAS 7), and extensive Notes covering accounting policies, segment reporting (IFRS 8), related-party transactions (IAS 24), and contingent liabilities (IAS 37).

Consolidation Mechanics

Under the acquisition method, the parent computes goodwill at the acquisition date, then eliminates the parent’s cost of investment against its share of subsidiary equity at that date. Post-acquisition reserves are brought in only to the extent of the parent’s ownership percentage. Inter-company balances, intra-group sales, and unrealised profit on stock held by one group company at the reporting date are all eliminated in full.

Concept	Treatment in consolidation
Goodwill	Capitalised, allocated to CGUs, tested annually for impairment under IAS 36
NCI	Fair-value method (full goodwill) OR proportionate share of net assets
Inter-company stock profit	Eliminate full profit if upstream/downstream stock still held
Proposed dividend	Note disclosure only (IAS 10); not a liability
Redeemable preference shares	Classify as liability under IAS 32
Merger relief (CAMA)	No share premium recorded on a qualifying merger of equals

Authorised and issued share capital are disclosed separately. Share premium arises on issue above par; it is not available for dividend distribution. Bonus issues transfer reserves to share capital with no cash movement. Basic EPS uses the weighted-average ordinary shares outstanding during the period; diluted EPS adjusts for the assumed conversion of all dilutive potential ordinary shares (options, convertibles).

🔴 Extended — Deep Study (3mo+)

Comprehensive coverage for students on a longer study timeline.

Worked Micro-Example: Consolidated Goodwill

H Holdings acquires 80% of S Ltd for ₦600m when S’s identifiable net assets at fair value are ₦500m.

Parent’s share of net assets = 80% × ₦500m = ₦400m
Goodwill (proportionate NCI basis) = ₦600m − ₦400m = ₦200m
Goodwill (full fair-value NCI basis, assuming NCI at fair value = ₦130m) = ₦600m + ₦130m − ₦500m = ₦230m

Under the proportionate method, NCI appears at 20% × ₦500m = ₦100m. Under the full method, NCI appears at its fair value of ₦130m. The ICAN paper frequently tests both approaches in the same question.

Common Traps and Exam Strategy

Merger relief vs acquisition accounting: Merger relief (CAMA) applies only to a true merger of equals; otherwise apply IFRS 3 acquisition method with full share premium.
Inter-company stock profit: If downstream (subsidiary sells to parent), the unrealised profit is deducted from group profit and inventory; if upstream, attribute it to NCI when measured at fair value.
Cash flow classification: Dividends paid are financing; dividends received are operating (under IAS 7 indirect method); interest paid can be operating or financing depending on policy disclosure.
Disclosure depth: Notes must reconcile carrying amounts, list accounting policies, and break down PPE, intangibles, and borrowings by class.

Practice Prompts

P Co acquired 75% of S Co on 1 Jan 2025 for ₦450m; S’s net assets at fair value were ₦400m. Compute goodwill under both NCI methods and draft the consolidated retained earnings adjustment for an unrealised stock profit of ₦20m held by S at year-end.
Prepare the Consolidated Statement of Financial Position extracts (share capital, share premium, retained earnings, NCI, goodwill) and reconcile them to the parent’s separate books given opening RE of ₦120m, post-acquisition profit of ₦80m, and proposed dividend of ₦15m.

High-yield focus: ICAN’s 3% Accounting weighting typically surfaces 1–2 computation questions per diet on goodwill, NCI, inter-company eliminations, and EPS.

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Company Accounts