Question

In: Accounting

List and explain the accounting standard issues relevant to the consolidation process.

List and explain the accounting standard issues relevant to the consolidation process.

Solutions

Expert Solution

AS 21 - Consolidated Financial Statements

This standard applied when accounting for investment in subsidiaries in a separate financial statement of the present.

For consolidating financial statements in a way to present financial information about a group as that of an enterprise, the below mentioned steps must be taken:

  1. Eliminate the cost to the parent of its investment made in each of its subsidiaries and such parent's entity portion of each fits subsidiaries, at the date when the investment in such subsidiaries are made
  2. any additional cost to the parent company of the investment in the subsidiaries over the parents company's share of equity of subsidiary, at the date on which investment in such subsidiary is done, must be shown as goodwill for recognizing as the asset in its consolidated financial statements.
  3. When the cost to the parent of the investment in the subsidiary is lower the the parent company's share of the equity of subsidiary, a date on which the investment in such subsidiary is done, the difference must be treated as the capital reserve in the consolidated financial statements
  4. a portion of minority interests in net income of the consolidated subsidiary for reporting period must be recognised and adjusted against income of the group fro arriving at the net income which is attributable to owners of such parent ocmpany;
  5. a portion of minority interest in net assets of the consolidated subsidiaries must be recognized and provided for in consolidated balance sheet distinctly from the equity and liabilities of the parent company.

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