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Steps in preparing the consolidated balance sheet
Step 1:Prepare the 3 important accounts i.e.
Step 2:
Add the assets and liabilities of the subsidiary company to those of the holding company noting the following:a) The investment in subsidiary company appearing in the holding company balance sheet will be excluded from the consolidated balance sheet and instead we will have goodwill on consolidation.
b) The ordinary share capital and preference share capital in consolidated balance sheet will only be that of the holding company. This is because the share capital of the holding company and the subsidiary is split between the cost of control (holding companies share) and the Minority interest.
c) The group retained profits will be the balance appearing in the group retained profits account and group capital reserves should also be completed the same way company group retained profits. (This means that group capital reserves will be made up of the holding company’s capital reserves plus holding companies share of post acquisition capital reserves in subsidiary).
d) The minority interest will be shown as part of shareholders funds in consolidated balance sheet but this is after getting the sub-total of the ordinary share capital, preference-share capital, group capital reserves and group retained profits.
GOODWILL This is defined as “the difference between the value of a business as a whole and the fair value of its net separable assets”. Goodwill in practical sense is the advant
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