BONUS ISSUE IN CONSOLIDATION

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anonymous

student

664 Points Posted on 23 July 2020

Hey, If A had acquired 80% shares in B on 01/04/2016 where the General Reserve balance was 50,000 and P/L balance was 60,000

B issued bonus for 1 share for every 5 held on 01/10/2019 at par from General Reserve. No entries was made in both the books.

At the year end on 31/03/2020, Share capital before bonus issue was 5,00,000/-, General Reserve is 80,000/- and P/L is 1.00.000/-

Can some one help me how this bonus issue has to be treated with and also bifurcation of capital and revenue profits

Replies (3)

Quick Summary

This discussion addresses a complex accounting scenario involving a bonus issue by a subsidiary after a parent company acquired a majority stake. The core issue is how to correctly account for this bonus issue within consolidated financial statements, particularly concerning the bifurcation of capital and revenue profits. Participants are seeking guidance on the proper treatment of reserves and share capital adjustments following the bonus share issuance and its impact on consolidated reporting.

yasaswi gomes

My grammar is 💯 good I

5110 Points Posted on 25 July 2020

If subsidiary is issuing, it will not be consolidated as the parent share capital alone is shown in the consolidated statements. I do understand reserves will decrease during the issue of the bonus shares and the group share of consolidated reserves will be presented.

anonymous

student

664 Points Posted on 25 July 2020

Originally posted by : yasaswi gomes
	If subsidiary is issuing, it will not be consolidated as the parent share capital alone is shown in the consolidated statements. I do understand reserves will decrease during the issue of the bonus shares and the group share of consolidated reserves will be presented.

Yeah.. but I am getting confused while calculating capital and revenue profits

yasaswi gomes

My grammar is 💯 good I

5110 Points Posted on 25 July 2020

All capital profits will be transferred to reserves and surpluses. You can consolidate them by parent reserves brought forward+groups share of reserves brought forward.

The revenue profits are consolidated in the method of Parent+Subsidiary revenues less intragroup transactions.

For the above:

Calculate share capital and reserves for subsidiary first after bonus issue from standalone statements.

In the consolidated statements, show only parent share capital.

Consolidate reserves in the above said way.

Consolidate income statement normally as this bonus issue will not impact consolidated income statement.