Acquisition during the financial period-group accounts, Financial Accounting

Acquisition during the financial period

The holding company may acquire the subsidiary company partway through the financial period such that as at the balance sheet date, the subsidiary company has been held for a period of less than 12 months.

The consolidation procedure does not change because we are dealing with the assets and the liabilities of the two companies as at a certain date..

However, the following two points need to be considered;

a) Computation of retained profits acquisition
As the holding company has acquired the subsidiary company while trading is taking place, then it may be difficult to determine retained profits as acquisition, unless financial amounts of subsidiary company are prepared.

Therefore, to simplify the computations of retained profits on acquisition, we normally assume that the retained profits for the year of the subsidiary company accrue evenly and they can be split between the pre-acquisition and post acquisition based on the months.

Thereafter, the retained profits on acquisition are given as follows;

Retained profits on acquisition = Retained profits b/d + Re-acquisition retained profits for the year.

b) Pre-acquisition dividends

Pre-acquisition dividend is dividend paid by the subsidiary company out of pre-acquisition profit or it is the dividend that is received or receivable by the holding company from the subsidiary company that relates the period before acquisition.
   
Thus if the holding company has owned the subsidiary company for a period of less than 12 months and the holding company receives some share of dividends paid from the subsidiary company then the holding company will receive some pre-acquisition dividends.

Posted Date: 12/12/2012 4:08:37 AM | Location : United States







Related Discussions:- Acquisition during the financial period-group accounts, Assignment Help, Ask Question on Acquisition during the financial period-group accounts, Get Answer, Expert's Help, Acquisition during the financial period-group accounts Discussions

Write discussion on Acquisition during the financial period-group accounts
Your posts are moderated
Related Questions
Suppose a risk neutral agent has $100,000 today that he wants to save for one year. Compare the following two savings plans. Bank A offers a standard savings account with 4% p.a

What are the legal distinctions between a business combination, a merger, and a consolidation? Mergers Vs Acquisitions: When one company takes over another and clearly esta

effects of public debt on production, d

Write down what processes and data you would analyse when looking at the following scenarios and write down any improvements you could include to ensure that the problem would be l

the role of international accounting toward promotion of generally accepted accounting principle

Q. Sensitivity Analysis of Project? This system measures the change in project NPV arising from a fixed change in each project variable or measures the change in every project

What have been the dividends per share? What is the CAGR of dividends per share from 2008 to 2010? What was the retention ratio for 2008 to 2010? Calculate the DPS growth

There are two projects A and B. The initial capital outlay of A and B are Rs.1,35,000 and Rs.2,40,000 respectively. There will be no scrap value at the end of the life of both the

Help making t-Accounts

The following figures are taking from the book of Sheen Compnay limited as on december 31,2009 DEBIT SIDE : opening stock Rs 75000 purchases 245000 wages 30000 c