Acquisition of a subsidiary company during the year, Financial Accounting

ACQUISITION OF A SUBSIDIARY COMPANY DURING THE YEAR

When the holding company acquires a subsidiary company portray during the financial period, and then the approach to preparing the consolidated income statement will change slightly.  This is because IAS 27 requires that the subsidiary company should be consolidated from the date of acquisition.

This means that the results of the subsidiary company should be assumed to accrue evenly over the year and thus they can be split between pre-acquisition and post-acquisition period.

Thereafter the post-acquisition results are consolidated the normal way, paying attention to the following items.

1) The sales, cost of sales, expenses and tax of the subsidiary company that relate to the post-acquisition period will be added to those of the holding company while making adjustments for inter-company items that have arisen or that relate to the post-acquisition period. e.g.; Inter-company sales should relate to the post acquisition period, goodwill impaired should be pro-rated and same case applies for additional depreciation on fair value adjustments.

2) The computation of the minority interest will remain as before only that this time we will take the post acquisition profits after tax of the subsidiary company.

Note: In the adjustments, there will be no unrealised profit on opening inventory on opening inventory.

3) The group retained profits b/f will only be for the holding company. This is simply because the retained profits b/f of subsidiary company is all pre-acquisition.

Note: In computing goodwill, do not forget pre-acquisition dividend.

Posted Date: 12/12/2012 5:02:14 AM | Location : United States







Related Discussions:- Acquisition of a subsidiary company during the year, Assignment Help, Ask Question on Acquisition of a subsidiary company during the year, Get Answer, Expert's Help, Acquisition of a subsidiary company during the year Discussions

Write discussion on Acquisition of a subsidiary company during the year
Your posts are moderated
Related Questions
If I bought a 10 year bond five years ago for 936.05. The bons make semiannual coupon payments at a rate of 8.4%. If the current price of the bonds is 1,048.77, what is the yield e

What is the objective of performing this test? What is the sampling unit? What is the population? These are the questions I am confused on the sampling and population I have som

What Accounting method (cash or accrual) would you recommend for the following businesses? a. A gift shop with average annual gross receipts of $900,000 b. an accounting partnershi

Management and operational control: Cost of goods sold and gross margin analysis, profit as net income analysis, operating expense analysis, contribution analysis and analysis of

We have discussed the computation of the future value in the previous sections; here let us work the process in opposite. Let us assume you have won a lottery ticket worth Rs. 1000

Q. Explain Productivity linked bonus? The grant of productivity-linked bonus is intended to provide substantial motivation towards achieving higher productivity by way of incre

Q. Show example on Ratio calculations? The current gearing of Springbank plc = 100 × (3·5m/4m) = 87·5% Total debt after issuing $3·4m of debt = 3·5m + 3·4m = $6·9m New le

following are the amounts of the assets and liabilities of St. Kitts Travel Agency at December 31, 2010, the end of the current year, and its revenue and expenses for the year. The

Explain the meaning of the terms "tangible" and "intangible" and discuss how these terms are used in describing assets.

Q. Investors advantage from financial intermediation? Investors advantage substantially from financial intermediation because: (a) By investing in a market or bank investors