How to workout +/- adjustment for Group Retained Earnings

Negative goodwill – always an addition to the parent’s retained earnings

Loss on investment – depends what type of investment. If it’s not an investment involved in the acquisition of a subsidiary but is instead one of our group companies buying shares in, say, Cable and Wireless, then the loss on the investment will be deducted from the retained earnings of either the parent or the subsidiary, whichever company it is that holds that investment

It’s most improbable that the loss on the investment will relate to the investment by the parent in the subsidiary

It could be a loss on the parent’s investment in the associate in which case the entire loss will be deducted from the parent’s retained earnings

Decrease in contingent consideration – which company is potentially going to have to pay this consideration that is contingent? The parent! Therefore and fall in the estimate of the amount payable is recorded in the parent’s records – after all, that’s where the contingent consideration was recorded on the event of the acquisition of the subsidiary

However, that isn’t really your problem, is it!

The problem that you need to resolve is “How do I work out logically which company’s records are to be adjusted?”

Negative goodwill arose because the PARENT made a bargain purchase

Loss on investment could be recorded in either the parent or the subsidiary, dependent upon whose investment has fallen in value …

… unless it’s a fall in the PARENT’s investment in the associate

A decrease in the estimate of contingent consideration is a revision of an estimate of the PARENT’s contingent liability

Do you see a thread here? Work out which group company has a figure that is acrried at an amount that now requires amendment

Is that better?