Joined: 01 May 2010 Location: United States
Online Status: Offline Posts: 93
Posted: 16 May 2010 at 16:45 | IP Logged
Hello,
I have not taken Mergers & Acquisitions/Consolidations.
The only exposure I have is with Becker review materials.
My understanding of consolidation is:
Consolidated Financial Statements will combine the
parent's balance sheet with the Subsidiary's balance sheet with
the Eliminating Journal Entries affecting both balance
sheets. Is this correct?
If this is the case, then the Assets - Liabilities no
longer equals Equity. This is because Assets and
Liabilities are now recorded at Fair Value (adjustment) and
there is no adjusting done on the Equity side.
Joined: 30 Mar 2010
Online Status: Offline Posts: 130
Posted: 16 May 2010 at 17:46 | IP Logged
You are pretty much right on: the sub's equity is eliminated and the sub's
assets are adjusted to fair value. The parent's assets are not adjusted to fair
value. Don't forget to record the non-controlling interest if <100% owned.
The eliminating entries for inter-company transactions are pretty easy. The
only part that gets a little sticky is inter-company sale of depreciable assets,
especially when it's <100% owned! I would suggest looking at that example
100 times. I've done so and still don't quite get the NCI part of the IE's in
subsequent periods.
Just praying it doesn't come up on the exam! (which means it'll probably be
part of a sim)
Joined: 30 Mar 2010
Online Status: Offline Posts: 130
Posted: 17 May 2010 at 07:47 | IP Logged
I would just look at your book examples of Interco eliminations a bunch and
make sure you understand them well. Non-depreciable assets like land are
pretty easy, but inventories and depreciable assets like plant and equipment
can be more difficult.
Joined: 06 Jan 2010
Online Status: Offline Posts: 139
Posted: 17 May 2010 at 09:11 | IP Logged
Hey,
I thought i got consolidation but try looking at the sim for consolidation in Becker. I fell off my chair when i saw it. It a good review of everything for consolidation.
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Topic: Clarification on Consolidated Financials
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