高级财务会计Chapter 03_.pptVIP

Chapter Three Consolidation - The Effects of the Passage of Time In Chapter 2, we looked at consolidation on the date the combination was created. As time passes, the investment account changes, and the consolidation process becomes more complex. SFAS No. 142 - Goodwill and Other Intangible Assets SFAS No. 142 - Goodwill and Other Intangible Assets Consolidation - The Effects of the Passage of Time The parent can account for its investment in one of three ways: Equity Method Cost Method Partial Equity Investment Accounting Investment Accounting Subsequent Consolidation - Equity Method Record the Investment in Sub on the acquisition date. Recognize the receipt of dividends from the sub. Recognize a share of the sub’s income (loss). FMV adjustments and other intangible assets. Consolidation ExampleEquity Method Consolidation ExampleEquity Method Consolidation ExampleEquity Method Consolidation ExampleEquity Method Consolidation ExampleEquity Method- Consolidation Entry S Consolidation ExampleEquity Method Consolidation ExampleEquity Method Consolidation ExampleEquity Method Consolidation ExampleEquity Method Subsequent Consolidation - Worksheet Entries 5 basic entries are posted to the worksheet. The Sub’s equity accounts are eliminated. Other intangible assets are recorded and the Sub’s assets are adjusted to FV. The Equity in Sub Income account is eliminated. The Sub’s dividends are eliminated. Amortization Expense is recorded for the FMV adjustments and other intangible assets associated with the consolidated entity. Consolidation EntriesEquity Method Entry S Eliminate the sub’s equity balances as of the beginning of the period. Assign the difference to “Investment in Sub.” Consolidation EntriesEquity Method Entry A Adjust sub’s assets and liabilities to FV. Set up the Goodwill account and the other intangible assets. The difference is a reduction of the Investment in Subsidiary account. Consolidation EntriesEquity Method Entry I Eliminate the Equity