How consolidations change when a company acquires at least 50%, but less then 100% of another...

How consolidations change when a company acquires at least 50%, but less then 100% of another company. What new account/s are present? How are these accounts classified/reported. What consolidation entries change?

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Expert Solution

a) When company acquires less than 50%, it is considered as an associate.

Accounting for associate:

Equity method is followed for the same. Investments are recorded at cost plus share of profit attributable to parent (ie., to the extent of holding of parent in associate). So only one account appears - Investment in associates at the time of consolidation.

b) When company acquires more than 50%, it is considered as subsidiary.

Accounting for subsidiaries:

All assets are and liabities of subsidiary are added line by line in parents financials. (100% amounts)

Goodwill or bargain purchase is calculated and recorded as a separate line item at the time of acquistions.

Various adjustment entries are passed at time of consolidation to make accounting policies uniform.

Where, less than 100% shares are acquired, Non controlling interest is shown as separate line item below equity. It represents the interests in subsidiary which are not acquired by holding/parent.

ekkarill92 answered 1 year ago

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