Question

Compare and contrast the two (2) different consolidation processes of serial and single consolidation techniques when indirect ownership interests exist.

EXPLAIN IT WITH REFERENCES

Answer 1

Indirect ownership deals with interest in a subject that has interest (direct or indirect) on another subject and the share i calculated by multiplying the interest ownership at each level. if this becomes more that 5%, then it is supposed to be reported.

the folloing explains the consolidation process in brief:

for preparing consolidated financial statement, the company must do acquissition date fair value allocations along with reporting excess amortizations (if any present).If the company is a business group combination, then the whole process is repeated with each seperate acquisition. The only thing that changes when you account indirect ownership is subiduary income, which then affects equity income accrual and non-controlling interest share. Consider a family hierarchy as a business combination, then the subsiduar income should be calculated at the grandson level, then son level and finally reaches father.