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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA BT – FIA FBT › consolidated accounts
why is it necessary to apportion a subsidiarys profit or loss if acquired part-way through a financial year
Because if acquired part – way through it means that the profit from the period before acquisition does not relate to group. Think what does it mean acquisition – somebody has to sell his shares in the company and somebody is buying them. And imagine that the company pay out all profit as dividends to sharteholders.
So the person selling shares has the right to dividends from the profits up to the sale. And a new owner has the right to dividends from the purchase of shares up to the end of the year. It is the same with say selling car – you pay for costs and have a right to income (eg.if you rent your car) until you sell it. Since sale the new owner has right to income.