A group of
companies will comprise of parent company and subsidiary companies.
A parent company
is a company which has control over the operating and financing activities
and policies of
another company or companies in a group.
A subsidiary
company is therefore a company who’s operational and financial activities and
policies are
under the control of another company known as the parent company.
Consolidated
Balance Sheet
This is produced
or prepared by combining the Balance Sheet of the parent company and the
Balance Sheet of
the subsidiary companies.
The more common
areas dealt with will normally comprise of the retained earnings, non-
controlling
interest and goodwill calculation.
Important note:
Non-controlling interest was formally known as minority interest.
Consolidated
Retained Earnings
Consolidated
Retained Earnings = Parent Retained Earnings +
Subsidiary post-acquisition
Earnings
The above
formula depicts that Consolidated Retained Earnings is derived at by adding
both
the Parent’s
Retained Earnings to the Subsidiary Post Acquisition Earnings at the date of
consolidation.
Non-Controlling
Interest
This refers to
the minority shareholders or non-controlling shareholders’ share of the
subsidiary’s net
assets at the date of consolidation.
Goodwill
This refers to
the purchased goodwill. This is calculated by deducting the investment cost
with the net
assets of the acquired subsidiary.
There are many
different approaches to calculate the net assets. However, generally the
approach is as
follows:-
Example:-
At the date of
acquisition, the net assets is arrived as follows:-
Share capital xxx
Pre-acquisition
Profit/Loss xxx
Share Premium xxx
Other Reserves xxx
-----
Net Assets xxx
===
No comments:
Post a Comment