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In: Accounting

If the parent company acquires several blocks of a subsidiary's stock over a period of time...

If the parent company acquires several blocks of a subsidiary's stock over a period of time prior to gaining control, how are the various purchases consolidated? In this situation, how does the recording differ from the reporting?

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Expert Solution

In a situstion where parent aquires several blocks of subsidiarys stocks over a period of time before gaining control .

The consolidated financial statements are prepared from date on which holding subsidiary relation comes to effect i.e the percentage of shareholding attains or crosses 50%

eg:

01-07- 2018 A acquired 20% shares of B
01-10-2018 A acquired another 20% shares of B
01-11-2018 A acquired another 20% shares of B

Therefore as per above table the consolidated financial statements are prepared from 01-11-2018 as the holding is 60% ( it crosses 50%)

Difference between recording and reporting

Recording : this pertains to the bookeeping activity of documenting the transactions . Noting down all the transations relating to the entity.

reporting : this the process of analysing and interpreting the recorded transactions.

In this situation : when stocks are acuquired in several small blocks - all such acquisitions are recorded

when such aquisitions attains or crosses the limit of 50% - It is reported in the form of consolidated financial statements

ekkarill92 answered 1 year ago
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