Consolidated balance sheet-chain holding

What is the difference between Direct and Indirect Method adopted while preparing the consolidated balance sheet of a holding and a subsidiary company, particularly in chain holding cases? Please explain with an example.

Replies (12)

I dont know the methods But this much I know in chain Holding we have acquistion of subsidaries on same date and Acquistion of Subsidaries on Different Dates .Acquistion on different  dates we have to be careful while transffering profits from subsidary in last chain to the subsidary in next chain .Same date Acquistion in chain holding you dont have any problem in transfering the profits from subsidary in last chain to subsidary in next chain 

There is no such direct or indirect method....

When there are 3co.s to be consolidated like for eg.1,2,3

In indirect method you transfer the inter subsidary shareholdings to the respective subsidaries and then u proceed further consolidation.....like first u consolidate 2 and 3 companies and then proceed with the consolidation of all the three companies taking each to be an independent subsidary.......

While in direct method you dont adjust the inter subsidary shareholdings....ie., the step of consolidation of 2 and 3 priorly is eliminated and.....consolidation is merely done assuming each company to be independently related to the holding co......

The differance arises in the minority interest of the co. occupying the position of subsidary and simultaneously holding shares of other subsidary.............and the cap res....obtained while adjusting the cost of control........

Dear Friends,

I also have a query regarding Chain Holding Consolidation of B/S. While we prepare combined Cost of Control for all subsidiaries, we do not give share of GOODwill or Capital Reserve of initial investment of subsidiary in sub subsidiary to Minority Interest.

For Example: there are three companies A, B and C. C is subsidiary of B and B is subsidiary of A. in this case the G/W or C/R arise due to B's investment in C is not given to Minority Interest of B, Why?

 

Please put some light on it

Good will or Capital Reserve arises between Investment held and Net Assets Owned and Controlled.Minority Interest is share in Net Assets but not controlled so generally we dont find Good Will or Capital Reserve for Minority Interest in any case 

Dear Friend,

I am talking abount the G/W or C/R which arise between Investment of B Ltd.(First Subsy) and Net Asset of C Ltd. (Second Subdy), this amount always arise but we don't calculate is separately for B only instead its included in Net G/W or C/R which comes out from Combined Cost of Control of A & B. 

Dear Friend,

I am talking about the G/W or C/R which arise between Investment of B Ltd.(First Subsy) and Net Asset of C Ltd. (Second Subsy), this amount always arise but we don't calculate it separately for B only instead its included in Net G/W or C/R which comes out from Combined Cost of Control of A & B. 

Dear Friends,

Plz ignore earlier mails, and find attached herewith my query about consolidated B/S with an example.

Nitin

I cant Understand as to why You want to divide Good will between Holding Company and Minority Interest.See ach and every Investment we make there arises Good will or capital Reserve as compared to Net Assets Taken over .and this good will is carried in Balance sheet and amortised accordingly as per AS-26.I dont understand as to why You want to divide good will again like post Profits 

Dear Friend Sivaram,

Bcoz Goodwill is the loss which arise on Investment of B in C. And it should be divided between Holding company & Minority Interest of B. Its my understanding, if not then plz clarify.

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