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Hi Mr John..I cant understand the point you made on consolidated statements topic..
Which is parent company shareholders are only entitled to post acquisition earnings…How is that..They should be entitled to pre acquisition too..Because those shareholders in fact paid for the earnings..So when they make another profit this adds to the previous one retained earning…And of course they can get paid divident from that whole retained earning?
THanks
If you watch all the lectures you will see that they are entitled to their share of all of the earnings.
However the pre-acquisition earnings are part of what they initially paid for and are therefore included in the calculation of the goodwill arising on consolidation.
The consolidated retained earnings only include their share of the post-acquisition earnings.Anyway Mr John…You’re dodging the question..I still can’t get answer to my question which is What happens to pre acquired retained earnings…..Parent company’s shareholders are eligible to get paid from pre acquisition in a form of dividend..?
I am not dodging the question at all.
There is no consolidated company in law – there are two separate companies and the consolidated accounts are prepared to show it as one big company, but it is not a company in law.
If the subsidiary decides to pay a dividend, then their retained earnings fall and the earnings of the parent increase. Separately, the parent company can pay a dividend out of its total earnings if it wants to.
This has no direct effect on the workings for the consolidated statements (and intracompany dividends are not relevant for Paper F3 – not until F7).
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