A consolidated financial statement takes the financial statement of a parent company and its subsidiaries and combines them into one comprehensive financial statement.When one company owns part or all of another company, it must account for this ownership interest in the other company.Let’s be more practical today and learn some advanced accounting techniques.
I’ll do it on a case study, with explaining what I do and why.
If you don’t like reading, you can skip to the end of this article and watch my video.
Issued capital comprises that part of the authorised share capital that has actually been offered to the public for subscription and has been actually allotted the subscribers.
It can be issued other than for cash and those issued for cash.
There are three ways to account for the ownership interest: cost, equity and acquisition methods.
The type of method depends on how much of the second company the first company owns.
To gain a complete picture of the entire organization, you combine (consolidate) all the assets and liabilities of each business unit, eliminating intercompany transactions and minority interest relationships by creating consolidation elimination journal entries.
You use trees to define the relationships among business units in a consolidation, creating a separate consolidation tree for each configuration.
Measure NCI at its proportionate share of Baby’s net assets.
Please note here that in the above statements of financial position, .
If a company owns between 0 and 20 percent of another company's stock, then the company uses the cost method for the investment.