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A query

krina (student) (1263 Points)

11 September 2012

Hello everyone..

Can someone please explain me why CONSOLIDATION OF FINANCAIL STATMENTS is done ??

i.e why is consolidation reqiured ?

& how do we prepare accounts for the same ..

Thanks in advance ...

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2 Replies

CA abhinandan agarwal (CA CS Bcom(H)) (174 Points)
Replied 11 September 2012

A company haviny many branch or subsidiary..so to find out the actual profit of the company we consolidated the accounts..

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Bhaskar Unnikrishnan CPA CMA (Accounts / Administration) (414 Points)
Replied 12 September 2012

Addtion to Above: In simple worlds, consolidated statements are prepared by: * Adding the assets of the parent and subsidiary, line by line * However, excluding the item "investment in Subsidiary" in the statement of financial position of the parent company * Adding the liabilitues of the parent and subsidiary, line by line. Equity and Reserver includes: *Equity and reserves of the parent only and * only the reserves of the subsidiary that have been earned since acquisition. (consider as ZERO at the date of acquisition) If the parent takeover less than 100% Share of subsidiary, calculate minority interest and show on parent's balance sheet after Equity items. Other important item to consider is purchased goodwill and bargained purchase (i.e. buying price excceds subsidiary's asset value and vice versa)

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