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what is the sequence of workpaper adjustments and eliminations while preparing a consolidated financial statement?  

what is the sequence of workpaper adjustments and eliminations while preparing a consolidated financial statement?  

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Expert Solution

The sequence of working paper adjustments and eliminations while preparing a consolidated financial statement are as follows:

  • In case the parent's shareholding in subsidiary is between 20% - 50%, only equity method should be used.
  • Combine like items of assets, liabilities, income, expenses and cash flows of the subsidiary with the parent.
  • Assets should be revalued at Fair Market Value for presentation in Consolidated Financial Statements.
  • Eliminate carrying amount of parent's investment in subsidiary
  • Eliminate parent's portion of equity of each subsidiary
  • Eliminate non-controlling interest part of post-acquisition of Retained Earnings of the subsidiary
  • Recognize non-controlling interest of net assets at the reporting date.
  • Compute goodwill and perform goodwill impairment test.
  • Eliminate related intragroup transactions (both upstream & downstream sales)
  • Consolidate retained earnings = 100% of parent + % holding * retained earnings in subsidiary

ekkarill92 answered 1 year ago
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