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negative retained earnings

Forums › Ask CIMA Tutor Forums › Ask CIMA F2 Tutor Forums › negative retained earnings

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • May 1, 2018 at 1:46 am #449581
    rapomphuthi
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    I would like to find out the following:

    When the parent acquires the subsidiary and therefore the subsidiaries retained earnings being negative during acquisitions, then during consolidations why the parent add the negative figure of subsidiary negative retained earnings into its consolidated retain earnings for parent.

    eg. $200.00 negative retained earning for subsidiary, which is subtracted from Subsidiary’s Share Capital.

    Therefore Parent add this $200.00 into its retained earnings, during consolidations.

    May 4, 2018 at 10:03 pm #450140
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    It depends on what the retained earnings are at the reporting date, as you will then compare this to those at acquisition to find the post acquisition reserves.

    If the negative retained earnings at acquisition have reduced then there is a positive movement in the post acquisition profits and so we would add this in to the group retained earnings.

    Thanks

    Chris

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