Financial Accounting Part - Invesments - Consolidation
4 important questions on Financial Accounting Part - Invesments - Consolidation
How is the investment in the subsidiary reported on the parent's book?
Investment in the subsidiary is reported on the parent's books as a long-term investment.
Parent generally prepares consolidated financial statements.
Describe 'consolidated financial statements'.
Consolidated financial statements: 'Group' financial statements in which the separate accounts of the parent and subsidiary are merged and aggregated as if this group was one company.
If the parent own 100% of the shares in the subsidiary, consolidation implies?
Elimination of all dependencies between parent and subsidiary --> avoid double counting.
Aggregating (Zusammenfassen) the remaining accounts.
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What are key eliminations in consolidation?
- The investment asset versus the subsidiary's equity
- Loans between the parent and subsidiary
- Intercompany profits
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