Kế toán, kiểm toán - Business consolidations

Business ConsolidationsParent/SubsidiaryWhen investor owns more than 50% of voting stock of another company, assume ability to controlInvestor company is parentInvestee company is subsidiaryConsolidated Financial StatementsParent and subsidiary may be separate legal entitiesFor reporting, view as single economic entityConsolidated financial statements show financial position and operating results of combined companiesFASB No. 94 requires consolidation when parent has controlling interestReciprocal AccountsAccounts in two separate sets of books that represent a common element and will cancel each other outInvestment on parents books and owners’ equity on subsidiariesFor intercompany transactionsAccounts receivable and accounts payableSales and cost of goods soldConsolidatingCombine similar accounts from the separate financial statements of parent and subsidiaryEliminate reciprocal accountsWork Sheet for Consolidated Balance Sheet Par Sub Elimin ConsolCash 50 40 90Invest 100 100 0PPE 150 65 215 Total 300 105 305Liab 75 5 80CS 175 80 80 175RE 50 20 20 50 Total 300 105 100 100 305Worksheet for Consolidated Income Statement Par Sub Elimin ConsolSales 500 200 60 640CGS 300 120 60 360Op. Exp. 100 40 140 Total exp 400 160 500Net income 100 40 60 60 140Acquisition of Less Than 100% of SubsidiaryEliminating parent investment against subsidiary owners’ equity leaves some subsidiary owners’ equityMinority interestOwnership interest of remaining owners in assets of subsidiaryAcquisition of 100% at More Than Book ValueElimination of 100% of subsidiary’s owners’ equity against investment leaves a debit balanceExcess paid for investment over value of assets is goodwillGoodwill amortized over useful life, not to exceed 40 yearsAnalyzing InformationFor companies with goodwill, is amortization reasonable?If majority owned company is not consolidated, what is impact?For companies using equity method, how much cash dividends are actually being received?