## **Dear Trustees,**
## **Harrow Carers**
376-378 Pinner Road Harrow Middlesex HA2 6DZ
23 December 2024
## **Explanation of Consolidation Adjustment and Reconciliation for Goodwill Adjustment**
As part of our audit of the consolidated financial statements of Harrow Carers Group for the year ended 31 March 2024, we aim to provide clarity on the consolidation adjustments and goodwill reconciliation applied during the preparation of the group accounts.
## **1. Consolidation Adjustments**
Consolidation adjustments are made to combine the financial statements of the parent charity and its subsidiary entities, ensuring that the group financial statements present a true and fair view of the group’s financial position and performance as a single economic entity. These adjustments typically include:
- **Eliminating Intercompany Transactions** : All intra-group transactions, balances, income, and expenses are eliminated to avoid double counting.
- **Adjusting for Non-Controlling Interests (NCI):** Where the charity does not own 100% of a subsidiary, adjustments are made to reflect the share of net assets and profits attributable to NCI.
- **Harmonising Accounting Policies** : If the subsidiaries have used accounting policies different from the parent entity, adjustments are made to align them.
The following adjustments were made to eliminate intercompany transactions:
||Dr(£)|Cr(£)|
|---|---|---|
|Administration costs|253||
|Tangible fixed assets||(253)|
|_Adjustment relating to shortfall on depreciation charged by Elite Specialist Care Ltd_|_Adjustment relating to shortfall on depreciation charged by Elite Specialist Care Ltd_||
|_(ESL)_|||
## **2. Goodwill Adjustment**
Goodwill arises when the purchase consideration paid by the parent charity to acquire a subsidiary exceeds the fair value of the net identifiable assets acquired. The adjustments and reconciliation for goodwill include:
- **Initial Recognition** : Calculating goodwill as the difference between the acquisition cost and the fair value of net assets at the acquisition date.
- **Impairment Testing** : Reviewing goodwill annually (or when indicators of impairment arise) to assess whether the carrying value exceeds its recoverable amount. Any excess is written off as an impairment expense.
- **Amortisation** : As permitted under the Accounting and Reporting by Charities: Statement of Recommended Practice (Charities SORP FRS 102), adjustments were made to goodwill to reflect the amortisation expense.
## **Reconciliation for Goodwill**
The reconciliation process involves:
1. Confirming the accuracy of the acquisition cost and fair value of net assets.
2. Tracking any impairments or amortisations applied to goodwill in the reporting period.
3. Providing an updated carrying value of goodwill as at the reporting date.
|**Description**|**Amount(£)**|
|---|---|
|**Cost**||
|At 1 April 2023
246,106||
|At 31 March 2024
246,106||
|||
|**Amortisation**||
|At 1 April 2023
98,442||
|Charge for theyear
49,221||
|At 31 March 2024
147,663||
|||
|**Net Book Value**||
|At 1 April 2023
98,443||
|At 31 March 2024
147,664||
|||
## **Net Movement in Funds**
The net effect of the adjustments on the charity group’s financial performance is summarised below:
|**Description**|**HC**
**Consoli**
**dated**
**(£)**|**HC**
**(Solus)**
**(£)**|**ESL(£)**|**Total**
**(£)**|**Variance**
**(£)**|**Goodwill**
**charge**
**(£)**|**Deprecia**
**tion**
**shortfall**
**(£)**|
|---|---|---|---|---|---|---|---|
|**Net**
**movement**
**in funds**
67,132
118,291
(1,685)
116,606
49,474
49,221
253||||||||
## **Conclusion**
These adjustments ensure compliance with FRS 102 and provide a clear representation of the charity group’s financial health. Should you have any questions or require further clarification, please do not hesitate to contact us.
Yours sincerely,
…………………………………………………………………………………………………..
Mr Gavin Fernandes FCA (Senior Statutory Auditor) For and on behalf of MG Audit Services Limited, Statutory Auditor
166 College Road Harrow Middlesex HA1 1BH
Date: ………………………..
`12/24/2024`