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Hello There All,
Might be a dumb question I’m sorry. But when you add the assets line by line in the group statement for consolidating a subsidiary, for example for inventory or receivables how comes you add them straight totally 100% for example for inventory you add 450 for parent and 580 for subsidiary, shouldn’t it be 70% of 580? when only 70% was acquired. Don’t you need to do 70% of the subsidiaries particular asset or liability, why adding 100% of Asset or liability together when only 70% acquired of the subsidiary.
Apologies and Thanks in advance
It’s to do with showing that the parent controls all the assets of subsidiary. It’s an example of substance over form. The minority stake of subsidiary share is still reflected in non controlling interest. Hope this helps.
Thank you for the answer.
One more question, we are told that if a subsidiary is aquired Mid Year then it’s profit and loss statement is pro rated from revenue expenses costs down to and including tax before consolidating line by line do Parent + Mid year Aquired of revenue let’s just say 6 months revenue.
What about in consolidation of statement of financial position, do we Pro rata the assets liabilities of the subsidiary if mid year acquisition?
You are welcome.No pro rata adjustments of kind carried out for subsidiary in profit and loss as statement of financial position a snapshot of current position. Different calculations are needed if subsidiary becomes associate or associate becomes subsidiary during year.
Thank you so much MrJon.
Have a great day
You are welcome.