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I see this is the basic question, but I still can not understand why the share capital of susidiary is not recorded and how comes that the balance balance. As we record all assets and all liabilities/ P+S/ in full, partially reserves from Sub where our share of sub share capital is recorded and how. Because I see that in order to balance the share that is not our is recorded in NCI/ true?/
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sorry, I wasnt able to understand anything how comes the balance to balance- we take both assets, both liabilities =net assets for both adding together which is aslo share capital +share premium + reserves for both . So how comes to take just parent share capital and premium + parent’s reserves and just subsidiary growth proportionate/ not all sub reserves / and the balance still to balance. Can you show with numbers? and why sometimes we deduct investment in subsidiary in Group balance sheet, sometimes not.
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ok so when a parent acquires a subsidiary it is making investment in the net assets of a company. i mean it is acquiring the net assets (assets-liabilities)
so in individual financial statement of parent entry wud b
Dr Long term Investment
Cr Cash (assuming cash was paid to acquire)but in consolidated f/s we exclude the long term investment from non current assets and consolidate or merge all assets and liabilities.
if the parent hasn’t acquired 100% net assets then we also show NCI in equity portion to balance the consolidated balance sheet. this is a bird eye view of this concept..!!
Basically, the reason the share caputal of subsidiary is not shown separately in the consolidated financial statements of the entity is because it has already been capitalised as part of the goodwill calculation.The share capital and reserves of the subsidiary are cancelled with the parent’s account of investment in subsidiary just as any other balances arising between subsidiary and parent post acquisition such as loans from parent to subsidiary have to be adjusted in order to show the position of the entity as a whole in the consolidated financial statements of the entity.
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