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Hi John
I have been doing a lot of different consolidation questions for revision and have become a bit confused as a result. I would really appreciate some short clarification.
When consolidating we add up 100% of the assets and liabilities of the two companies (with any necessary adjustments for inter-group trades, PURP, fair value increases etc).
If the significant interest was formed within the accounting period, then we apportion by the months since it was formed.However, some questions they are consolidated on an ownership percentage basis, e.g. if the parent owns 70% of the subsidiary, then 70% of the assets, liabilities only are added (with month apportionment if necessary). I am imagining this or does this sometimes happen?
Thank you.
I think you must be imagining it. It used to happen a long long time ago, but these days we always bring in 100% of the assets and liabilities (subject to the adjustments you mention).
Thank you John.
I think I may have confused that with the method to calculate share of retained profit generated since acquisition or cost of investment.
I have found that although I understand things when I studied them, I afterwards muddled them up with other concepts. This site has really help me clear that up, by clarifying even on small details very clearly. I really appreciate it.
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