Chapter 3 – Consolidated Statements: Subsequent to Acquisition

TeacherThe previous chapter looked at the procedures required to consolidate financial statements at the date the parent acquires a controlling interest in the subsidiary.  While this would rarely occur in practice, it does set the stage for the consolidation procedures subsequent to acquisition.

An important concept to keep in mind is that the elimination entries that are made to facilitate the preparation of the consolidated financial statements are never actually recorded and posted.  What this means is that in subsequent years, those same elimination entries will need to be made, along with others.

In the previous chapter, you were introduced to two elimination entries.  The first related to the “determination of excess” in the D&D schedule.  The second related to the “distribution” of excess from the D&D schedule.

In consolidations subsequent to the date of acquisition, these two elimination entries need to be made.  Also, income impacts from these elimination entries have to be made.  For example, if a depreciable asset is increased in value, then the depreciation expense in subsequent years must also be increased.  There’s more!  Go here to find out.