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Difference-amalgn & consolidation of financial sttmts problem

Prachi Srivastava (Finance) (368 Points)

09 December 2014

Hi All,

I have done amalgamation problems and now doing Consolidation of Financial Statements problems.

Can anyone tell me what is the difference between these two problems. I find them very similar. Questions given and treatment done both look similar.

If anyone can ennumerate the basic difference in approach of solving these problems, it will help me a lot.

Thanks

Prachi.

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5 Replies

rohit (Student CA Final ) (117 Points)
Replied 09 December 2014

Amalgation adjustments affects standalone fianncials of both the companies but consolidation is just reporting requirement of holding company i.e. it never affects standalone fianancials of both companies.
Amalgamation is takeover of business along with shares Consoidation is only takeover of shares by holding company. Therefore holding company record investment in its books rather to adjust assets & liabilities of subsidiary.

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Prachi Srivastava (Finance) (368 Points)
Replied 09 December 2014

In consolidation, if there are both pre-acquisition and post acquisition dividend received by Holding company from subsidiary how should we treat them in the books of Holding and subsidiary companies.

e.g if A Ltd. acquires 54,000 shares of B ltd(90%), pre-acquision dividend is Rs.18,000 and Post acquisition dividend is Rs.4,500, how these dividends should be treated in Balance sheet of Consolidated Financial Statements.

Regards,

Prachi

RAVINA VATS (STUDENT) (69 Points)
Replied 09 December 2014

Pre acq. Dividend - deducted from cost of investmemt Post acq. Dividend- tfd. To statement of P&L in ur example 18000 shall be deducted from cost of investment and 4500 shall be added to P&L (if 18000 and 4500 is total dividend paid by subsy co. Then take 90%, i hve assumed that this amount of dividend is received by holding co.)

Prachi Srivastava (Finance) (368 Points)
Replied 10 December 2014

In case of above problem, if holding company has credited its share of pre-acquisition dividend to its P&L Account, what correction do we need to make while preparing Consolidated financial statement.

RAVINA VATS (STUDENT) (69 Points)
Replied 10 December 2014

In this case a rectification entry shall be made. Such amount of pre acq. Dividend shall be deducted from p&l and reduce the same from cost of investment. Entry will be SPL a/c Dr. To Investment in subsy

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