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Dear Sir
During my consolidation, I came through a situation whereby one of the subsidiaries have a negative net asset and is in the phase of liquidation.
The balance sheet of the subsidiary is as follows:-
Assets
Cash and cash equivalent US$ 100Liabilities
Loan US$300
Equities(Accumulated losses) (US$200)Deconsolidating the subsidiary at group level, will it mean to DR Net Assets and CR income statement?
My understanding is that given it is a net liability, to reverse same, we need to debit the net asset (which account?) and credit income statement
I would be most grateful if you can advise on the above please..Very tricky situation!!Thank you in advance
Hi,
You should just consolidate the subsidiary in the usual fashion even if it is in a net liabilities position. You would therefore add across the assets and liabilities 100% on a line by line basis.
The only impact on profit or loss would be any likely impairment of the goodwill.
Hope this helps.
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