分析大三上课件高财chap.pptxVIP

Chapter ThreeConsolidations - Subsequent to the Date of AcquisitionOne who is slack in his work is brother to one who destroys.(Proverbs18:9)Consolidation – The Effects of the Passage of TimeLO 1The passage of time creates complexities for internal record keeping and the balance of the investment account varies due to the accounting method used.A worksheet and consolidation entries are used to eliminate the investment account and record the subsidiary’s assets and liabilities to create a single set of financial statements for the combined business entity.One who is slack in his work is brother to one who destroys.(Proverbs18:9)3-Investment Accounting by Acquiring CompanyLO 2For each subsidiary owned, there is an asset, the investment account, and an income account to record the earnings on the investment. The acquiring company selects one of these three methods to account for its investment:Equity MethodInitial Value MethodPartial Equity MethodOne who is slack in his work is brother to one who destroys.(Proverbs18:9)3-Investment Accounting by Acquiring CompanyComparison of internal reporting of investment methods.MethodInvestmentIncome AccountEquityContinually adjusted to reflect ownership of acquired company.Income accrued as earned; amortization and other adjustments are recognized.Initial ValueRemains at Initially-Recorded costCash received is recorded as Dividend IncomePartial EquityAdjusted only for accrued income and dividends received from acquired company.Income accrued as earned; no other adjustments recognized.One who is slack in his work is brother to one who destroys.(Proverbs18:9)3-Investment Accounting by Acquiring CompanyLO 3A parent’s choice of internal accounting method for subsidiary investments has no effect on the resulting consolidated financial statements.The selection of a particular method does not affect the totals ultimately reported for the combined companies.The internal accounting method used does require distinct procedures for con