Question

During the consolidation process, it may be necessary to make which of the following adjustments to the individual statements?

Select one:

a. pre-acquisition entries only.

b. business combination valuation entries and pre-acquisition entries in the consolidation worksheet.

c. business combination valuation entries only.

d. business combination valuation entries and pre-acquisition entries in the individual journals of the parent and the subsidiaries.

Answer 1

Consolidation accounting is the process of combining the financial results of several subsidiary companies into the combined financial results of the parent company. This method is typically used when a parent entity owns more than 50% of the shares of another entity

business combination valuation entries and pre-acquisition entries in the individual journals of the parent and the subsidiaries.

A parent company need only prepare consolidated accounts if it is a parent at the period end. for parents not reporting under the Act, if its statutory framework does not require the preparation of consolidated accounts.

The purpose of the pre-acquisition entry is to: - prevent double counting of the assets of the economic entity - prevent double counting of the equity of the economic entity - recognise any goodwill/gain on bargain purchase on consolidation - recognise assets and liabilities acquired within the business combination not ...