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1) What will be the accounting treatment if bonus shares are issued by subsidiary out of pre-acquisition profits in consolidation?
2) What will be the accounting treatment if bonus shares are issued by subsidiary out of post-acquisition profits in consolidation?
Thanks in Advance.
Hi,
The bonus issue is dealt with in the subsidiaries books in the same fashion as any other bonus issue (DR Share premium CR Share capital).
As the bonus issue s taking place at a point in time it is going to impact the post acquisition profits as it is adjusting the retained earnings at that date. This is only going to happen if there is insufficient share premium to use first though.
Thanks
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