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pre-acquisition dividendspre-acquisition dividends may also arise in the following situations1 where the holding company acquires the subsidiary
illustration of pre-aquisitionh ltd acquired 80 of s ltd during the year ended 311204 s ltd paid an interim dividend of 40000 on 30th
illustration computation of retained profits acquisition normal 0 false false false en-us x-none x-none microsoftinternetexplorer4
acquisition during the financial periodthe holding company may acquire the subsidiary company partway through the financial period such that as at
pre-acquisition losses in subsidiary company on date of acquisitionif the subsidiary company has a loss on the date of acquisition ie a debit balance
other aspects of the consolidated balance sheetthe consolidated balance sheet may require a special approach under the following situations1
fair value adjustmentifrs 3 requires that goodwill on consolidation should be based on the fair values of the net assets of the subsidiary company on
proposed dividends by subsidiary companyif the subsidiary company has proposed some dividends appearing under current liabilities then the dividends
differences in inter company balancesi cash in transitwhere one company may have sent cash which is yet to be received by the other company as at the
inter company balancesone of the companies may appear as receivable debtor or payable creditor in the other companyrsquos books just like in
unrealized profit on property plant and equipmentwhere one company sells an item of ppe to the other company in the group then this will lead to
unrealized profit on closing inventory where one company has bought goods from another company in the group and part of these goods are included in
goodwillpreviously under ias 22 on business combinations goodwill on consolidation used to be amortized over an estimated period of years however
intra company adjustmentsin preparing the consolidated balance sheet the following items may require adjustments1 goodwill2
illustration of consolidated balance sheeth ltd owned s ltd since the date of incorporation of s ltd the balance sheets of the two companies as
steps in preparing the consolidated balance sheetstep 1prepare the 3 important accounts iecost of control to determine goodwillgroup retained
loan stock in subsidiary the holding company may also invest in the loan stock of the subsidiary company or part of the loan stock of the subsidiary
preference share capital in subsidiary irredeemableinvestment in preference shares does not lead to ownership and therefore if the holding company
profits in subsidiary companythe remaining profits that belong to the holding company should be split between pre-acquisition profits and post
group retained profitsretained profits ideally should be the amounts that can be distributed as dividends therefore in arriving at group retained
minority interest miwhen the holding company owns less than 100 of the ordinary share capital of the subsidiary company then the other balance is
good will on consolidation good will on consolidation arises when the purchase consideration paid by the holding company is different from the value
consolidated balance sheetthe consolidated balance sheet involves adding assets and liabilities of the subsidiary to those of the holding company
consolidated acccounts1as 27 therefore requires that the holding a company should include the financial results of the subsidiary company in its own
subsidiary companies 1as 27a subsidiary company is a company in which the investing company also called holding or parent company controls the