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Is pre-acquisition retained earnings paid only by the parent company even if it acquires less than 100% share?
The cost of investment appears in the parent’s company accounts. However, this is cancelled in the Goodwill calculation against the subsidiary’s share capital and reserves including the preacquisition retained earnings.
Cost of investment therefore does not appear in the consolidated accounts.
If the NCI is already a shareholder of the subsidiary, then why parent company has to pay full pre-acquisition retained earnings? For example, parent owning 70% in the subsidiary?
That’s a totally different situation. It’s also one that I believe is not examined until the Strategic Business Reporting subject in the ACCA syllabus.Also preacquisition profits refer to profits earned before acquisition. If a parent is already in control of a subsidiary then it has already dealt with preacquisition profits as part of the Goodwill calculation.
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