Consolidated statement of financial position
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  • 1. * -Date of Acquisition
  • 2. controlling Interest Net asset Stock Acquisition acquisition Controlled Statutory Consolidation Company A comp.+ B= C company Consolidation of the Statutory Merger two Companies are AUTOMATIC becauseAall A comp. + B = company The Company whose subsequent transactionsNon-Controlling assets%were acquired is of Voting Stock Retains its legal are recorded in a single dissolved identity books of the set of and continues Interest(formerly called as Minority to prepare its own Acquirer. Interest) financial statements.
  • 3. *Consolidated Statement Consolidated statements- presents the financial statements of the parent and its subsidiary as those of a single economic entity.Consolidation working papers- are prepared to facilitate the consolidation of the separate statements of the parent and its subsidiary(s) into a single set of consolidated statements. Statements are to be consolidated when a parent company owns over 50% of the voting common stock of another company thereby having a controlling interest.
  • 4. To eliminate the Investment account on the parent company’s statement of financial position against the stockholder’s equity accounts in the statement of financial position of the subsidiary company.Elimination entries appear only on the consolidation working papers,they are not recorded on the books of either the parent or subsidiary company.
  • 5. Differ from asset Produce the same acquisition becauseconsolidated statement of there will be a non- financial position after controlling interest acquisition with an asset in the consolidated acquisition statement of financial position.
  • 6. Journal Entry on P Company to record Acquisition of S company’s net assets.Accounts receivable 32,000Inventory 20,000Equipment 158,000 Accounts payable 110,000 Cash 100,000
  • 7. P CompanyStatement of Financial Position Subsequent to Asset AcquisitionDecember 1,2011Assets Current AssetsCash 130,000Accounts receivable 72,000Inventory 70,000Total Current assets 272,000 Noncurrent AssetsEquipment 338,000TOTAL 610,000Liabilities and Equity Current LiabilitiesAccounts payable 390,000 Stockholders EquityCommon Stock 100,000Additional Paid In Capital 80,000Retained Earnings 40,000 220,000Total liabilities and equity 610,000
  • 8. Entry of P company on the date of Acquisition:Investment in S company 100,000 Cash 100,000
  • 9. * Acquisition of Wholly Owned Subsidiary -100% Interest P company acquires all of S company’s outstanding common stock for P100,000 cash. Consideration given (price paid) 100,000 Less: BV of Interest acquired (100%): Common stock, S company P50,000 APIC-S company 30,000 Retained Earnings- S comp. 20,000 100,000 Excess P -0-Note: In Financial Position of P company, only the statement of financial position has changed to reflect the P100,000 reduction in cash and therecording of the Investment in S company Account for the same amount.
  • 10. P Company and S CompanyStatement of Financial PositionDecember 1, 2011 P Company S Company AssetsCash P130,000 P -0-Accounts receivable 40,000 32,000Inventory 50,000 20,000Equipment-net 180,000 158,000Investment In S company stock 100,000 Total Assets P500,000 210,000Liabilities and Stockholder’s EquityAccounts Payable 280,000 110,000Common Stock 100,000 50,000Additional Paid in Capital 80,000 30,000Retained Earnings 40,000 20,000 Total Liabilities and SHE P500,000 210,000
  • 11. E(1) Common Stock- S Company 50,000 Additional paid-in capital- S comp. 30,000 Retained Earnings- S company 20,000 Investment in S Company 100,000
  • 12. Consolidation P S Company Eliminations Working Paper Company Consolidated Debit CreditAssetsCash P130,000 P-0- 130,000Accounts receivable 40,000 32,000 72,000Inventory 50,000 20,000 70,000Equipment-net 180,000 158,000 338,000Investment In Scompany stock 100,000 (1)100,000 --Total Assets 500,000 210,000 610,000Liabilities and EquityAccounts payable 280,000 110,000 390,000Common stock: P company 100,000 100,000 S company 50,000 (1) 50,000APIC: P company 80,000 80,000 S company 30,000 (1) 30,000Retained Earnings: P company 40,000 40,000 S company 20,000 (1) 20,000Total Liabilities and P500,000 P210,000 P100,000 P100,000 P610,000Equity
  • 13. P Company and SubsidiaryConsolidated Statement of Financial PositionDecember 1,2011AssetsCurrent AssetsCash 130,000Accounts receivable 72,000Inventory 70,000Total Current assets 272,000Noncurrent AssetsEquipment 338,000TOTAL 610,000Liabilities and EquityCurrent LiabilitiesAccounts payable 390,000Stockholders EquityCommon Stock 100,000Additional Paid In Capital 80,000Retained Earnings 40,000 220,000Total liabilities and equity 610,000
  • 14. When the book values of the net assets of the subsidiary areequal to their fair values, and the consideration given (price paid) is morethan the book value of interest acquired from the subsidiary, the excess istreated as GOODWILL Illustration: Assume that P Company acquires 100% of S company’s outstanding common stock for P110,000 in cash on December 1,2011. Entry on the date of acquisition in P company: Investment in S Company 110,000 Cash 110,000
  • 15. Computation of excess of the consideration over the BV of Interest Acquired:Consideration given (price paid) 110,000Less: BV of Interest acquired (100%): Common stock, S company P50,000 APIC-S company 30,000 Retained Earnings- S comp. 20,000 100,000 Goodwill P10,000 Two factors that results an excess in Consideration given over BV of Interest: 1. A difference between the book value of the subsidiary’s asset and/or liabilities and their fair values. 2. The existence of goodwill in the subsidiary company.
  • 16. E(1) Common Stock- S Company 50,000 Additional paid-in capital- S comp. 30,000 Retained Earnings- S company 20,000 Goodwill 10,000 Investment in S Company 110,000
  • 17. Consolidation P S Company Eliminations Working Paper Company Consolidated Debit CreditAssetsCash P120,000 P-0- 120,000Accounts receivable 40,000 32,000 72,000Inventory 50,000 20,000 70,000Equipment-net 180,000 158,000 338,000Goodwill (1) 10,000 10,000Investment In S 110,000 (1)110,000 --company stockTotal Assets 500,000 210,000 610,000 Liabilities and EquityAccounts payable 280,000 110,000 390,000Common stock: P company 100,000 100,000 S company 50,000 (1) 50,000APIC: P company 80,000 80,000 S company 30,000 (1) 30,000Retained Earnings: P company 40,000 40,000 S company 20,000 (1) 20,000Total Liabilities and P500,000 P210,000 P110,000 P110,000 P610,000Equity
  • 18. P Company and SubsidiaryConsolidated Statement of Financial PositionDecember 1,2011Assets Current AssetsCash 120,000Accounts receivable 72,000Inventory 70,000Total Current assets 262,000 Noncurrent AssetsEquipment 338,000Goodwill 10,000TOTAL 610,000Liabilities and Equity Current LiabilitiesAccounts payable 390,000 Stockholders EquityCommon Stock 100,000Additional Paid In Capital 80,000Retained Earnings 40,000 220,000Total liabilities and equity 610,000
  • 19. A Bargain purchase exist when the price paid is Less than the fair valueof the subsidiary’s net identifiable assets. The excess is treated as gain on Acquisition. Illustration: Assume that P Company paid only P80,000 for the 100% interest in the stockholders’ equity of S company. Entry of P company to record the acquisition: Investment in S Company 80,000 Cash 80,000
  • 20. Computation:Consideration given (price paid) 80,000Less: BV of Interest acquired (100%): Common stock, S company P50,000 APIC-S company 30,000 Retained Earnings- S comp. 20,000 100,000 Gain on acquisition P(20,000) E(1) Common Stock- S Company 50,000 Additional paid-in capital- S comp. 30,000 Retained Earnings- S company 20,000 Investment in S Company 80,000 Retained Earnings-P comp. (gain) 20,000
  • 21. Consolidation P S Company Eliminations Working Paper Company Consolidated Debit CreditAssetsCash P150,000 P-0- 150,000Accounts receivable 40,000 32,000 72,000Inventory 50,000 20,000 70,000Equipment-net 180,000 158,000 338,000Investment In Scompany stock 80,000 (1)80,000 --Total Assets 500,000 210,000 630,000 Liabilities and EquityAccounts payable 280,000 110,000 390,000Common stock: P company 100,000 100,000 S company 50,000 (1) 50,000APIC: P company 80,000 80,000 S company 30,000 (1) 30,000Retained Earnings: P company 40,000 (1) 20,000 60,000 S company 20,000 (1) 20,000Total Liabilities and P500,000 P210,000 P100,000 P100,000 P630,000Equity
  • 22. * Acquisition of Partially Owned Subsidiary (less than 100% interest) -It is a term applied to the rights of stockholders other than the parent company(controlling interest) to the net income or loss and net assets of the subsidiary. The non-controlling interest in the net income of the subsidiary is presented in the consolidated statement of comprehensive income and the non-controlling interest in the subsidiary’s net asset is shown in the consolidated statement of financial position in total and is not broken into common stock, additional paid-in capital, and retained earnings. It must be shown as a component of stockholders’ equity.
  • 23. IFRS 3 (2008) provides two options of measuring non-controlling interest in acquiree: at fair value, or At the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.