Question

When does the consolidation of financial information into a single set of statements become necessary?

How do you determine "Book Value" of an Asset?

Answer 1

The consolidation of financial information into a single set of Statements becomes necessary when the business combination of two or more companies creates a single economic entity. There is a presumption that consolidated financial statements are more meaningful than separate financial statements and that they are usually necessary for a fair presentation when one of the entities in the consolidated group directly or indirectly has a controlling financial interest in the other entities.

Book value of an asset is determined as value at which asset is carried on a balance sheet and calculated by taking cost of an asset less accumulated depreciation. Book value is also the net asset value of a company calculated as total assets less intangible assets such as goodwill, patents etc and also deducting liabilities.

For example

Car has a cost of $20000 and accumulated depreciation on car is $ 12000 so net of these two amounts(20000-12000) i.e. $8000 is book value or carrying value of an asset this amount is to be reported in company books.