acct

• Consolidation journals are posted into the consolidation worksheet in “adjustment” columns as follows:
Extract only

Parent
P Ltd.
$’000

Subsidiary
S Ltd.
$’000

Adjustments
DR

Lecture 9 part b
Consolidation: Wholly owned subsidiaries
Prepared by Emma Holmes and Rick
Newby

Land
Invt in S Ltd
Receivables
Cash

400
120
200
40
760

150

Share capital
Retained earnings
Creditors

500
160
100
760

100
20
50
170

Cons.
Balances

CR

XX
XX
XX

20
170
XX
XX
XX

XX
XX
XX
XX
XXX

Add down for sub-totals XX
XX
XX
XXX

All consolidation journals are recorded in the DR/CR columns
Where there are a large number of journals it is common to number them 1,2,3 etc
Purpose- to remove the parent’s investment in the subsidiary and the effect of all inter-entity transactions so that the final column shows an “external view”

The consolidation process

Consolidation worksheets (2)

• Before consolidating, it may be necessary to adjust subsidiary’s financial statements where:
1. the subsidiary’s balance date is different to the parent’s. In such cases the subsidiary is required to prepare adjusted financial statements as at the parent’s reporting date
2. the subsidiary’s accounting policies are different to the parent’s. In such cases the subsidiary is required to prepare adjusted accounts to ensure accounting policies consistent with the parent

• Consolidation journal adjustments are ONLY prepared for the purpose of consolidation
• they are posted onto the consolidation worksheet only (they are NOT recorded in the books of the parent or

The consolidation process (2)

Acquisition analysis

• Consolidation involves adding the financial statements of a parent and its subsidiaries and making a number of adjustment entries:
• business combination valuation reserve (BCVR)

• An acquisition analysis compares the cost of acquisition with the fair value of the identifiable net