You will submit a report as well as the necessary spreadsheets for Section III of the final project.You will discuss acquisitions and the consolidation process. You will also create a hypothetical example of a consolidation worksheet to submit with your report.
Specifically, the following critical elements must be addressed:
Guidelines for Submission: Your report must be submitted as a 2- to 3-page Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and at least two sources cited in APA format. Your accompanying spreadsheets must be submitted as Microsoft Excel files.
Answer preview
The financial consolidation of the parent financial statement as well as the subsidiaries entails three major processes. The first and the basic is a combination of the entries in the individual companies. The assets of the companies such as the current and long-term assets are combined to make one entry value. All the entries are combined to form one financial entry for each. Once the entries have been combined the second step is to eliminate the investment of the parent company on the individual subsidiary company (Hoyle, Schaefer & Doupnik, 2015). This avoids double counting the values of the subsidiary company which are included in the parent company statement. In this case, the considerations made involve both the pre-acquisition retained earnings and the post acquired retained earnings. This involves offsetting the investment. Once the investment is offset intragroup transactions and balances are eliminated accordingly. It is therefore notable that the information from the parent and the subsidiary company is treated as if it is information from one single entity. The consolidation holds when the parent company has more than 50% control of the shares in the subsidiary company.
