consolidate accounts

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:28AM in AAT student discussion
Hi Guys,
I am currently having a mental block on consolidate accounts , i'm trying hard to read through the text book (Osborne book), but i just cannot get my head around. Can anybody give me a hand? I know this quesion seems too general , but even few lines still much appreciated!!
Thanks in advance
chaoliss

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:consolidate accounts

    What is it your stuck on? What exactly do you want help with?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:consolidate accounts

    Hi Paul,
    Right, such as postive good will and negative goodwill, why one is showing on the balance sheet , another added to the income statement?
    Do we add up the subsidiary investment into cosolidate accounts? what kind of items only add up from subsidiary to consolidate accounts?
    sorry for these silly questions!!
    Thanks
    Chaoliss
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:consolidate accounts

    If youre studying international standards....

    In my textbook it says that negative goodwill (where the aquiring company actually paid less than the value of the net assets) is "recognised immediately in the income statement" i.e. it is not capitalised. Even this statement is qualified however because its not recognised immediately in the income statement if its only because the assets values in the subsidiarys balance sjeet are valued incorrectly. I must admit, and this is a bit of a coincidence, I had already planned to clarify this with my lecturer at uni tomorrow.

    Positive goodwill is capitalised but I can't remember off hand its ongoing treatment, I know it has to be tested annually for impairment.

    The parent companies investment in the subsidiary is not included directly in the accounts. You need to do a cost of control calculation which is something like this:

    Cost of investment - (the % of the nominal value of shares and the retained profits at that point which the parent bought) = goodwill

    So the result is that the share capital element and the retained profits in the subsidiary, and the investment in the subsidiary shown in the parents balance sheet will not appear in the balance sheet. Only the balancing figure of goodwill.

    To be honest it sounds like your on the first steps of group accounts and thus I could rattle on for ages. Is the textbook not helping you?

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