Advanced financial accounting PowerPoint presentation. In this presentation we will discuss a situation where we have a consolidation process and in the period of consolidation the parent sells subsidiary shares to a non affiliated entity. In other words, we have a consolidation process we have a parent subsidiary relationship parent owning a controlling interest over 51% of subsidiary. The parent then in that period sells some of the shares that they own in the subsidiary to a party that’s not affiliated in the consolidation, what will be the effect in the consolidation process of that get ready to account with advanced financial accounting?
Advanced financial accounting. In this presentation we will discuss inventory transfers and transfer pricing. Our objective will be to get an idea of what inventory transfers are what will be the effect of inventory transfers and how to account for inventory transfers when considering a consolidation process, get ready to account with advanced financial accounting, inventory transfers and transfer pricing. So in essence, we’re talking about the inventory going from one organization to another, we can think about this in terms of parent subsidiary type of relationships.
Advanced financial accounting. In this presentation we will discuss eliminating intercompany transactions, the objective will be to have an overview of the intercompany transactions, the types of intercompany transactions and the basic elimination entry for those intercompany transactions get ready to account with advanced financial accounting intercompany transactions, we’re going to start off by listing the intercompany transactions as we list them. Remember, our objective is in essence to remove the intercompany transactions.
Advanced financial accounting. In this presentation we’re going to discuss the consolidation process for less than 100% owned subsidiary. In other words at the end of this, we’ll be able to understand some of the major differences in the consolidation process from a company that was 100% owned. In other words, the parent owns 100% of the subsidiary and one in which the parent owns some other percent some stock share and percent other than 100%. Get ready to account with advanced financial accounting when there is a controlling interest but less than 100% owned interest in a subsidiary. In other words, the parent company owns something other than 100% of the common stock something over 51% still having a controlling interest still makes sense to do consolidated financial statements, because it’s useful to see the assets minus the liabilities, the net assets that the parent has control over, even if they don’t have claim over them. The performance based on you know, the net assets that they have control over.
Advanced financial accounting. In this presentation we will discuss push down accounting as it relates to parent subsidiary relationships controlling interest interest over 51%, where we have consolidation accounting taking place, we’re going to be applying pushdown accounting to it, get ready to account with advanced financial accounting. So the concept of pushdown accounting will take place when we have the parent subsidiary type of relationship and we have a situation where the purchase price when the parent purchased the subsidiary, the purchase price was more than the book value of the subsidiary, which could complicate of course the consolidation process as we’ve talked about in prior presentations. So we have a couple different options that we could do.
Advanced financial accounting. In this presentation we’re going to talk about consolidation calculations for less than wholly owned subsidiaries. So we have a parent subsidiary relationship, we’re going to be looking at the consolidation process to put the financial statements of the parents and the subsidiaries as if they are one entity, but we don’t have a wholly owned subsidiary. In other words, the parent does not own 100% of the subsidiary. How do we do the consolidation? in bad case, consolidation calculations less than wholly owned subsidiaries, that entities entire income and value must be reported per the current standards? So in other words, once again, we might think, well, on the income statement, maybe we would just report the part of the subsidiary that belongs to or is controlled by the parent, but that’s not typically the case. That’s not the case under generally accepted accounting principles.
Advanced financial accounting. In this presentation we’re going to talk about the concepts of direct and indirect control. If you’re ready to account with advanced financial accounting, we want to consider these concepts within the context of financial statements and consolidation. So you’ll recall that when we have consolidated financial statements, the idea is to put two financial statements together when one company has basically control over another company that being defined typically by having more than 51% interest because if you have more than 51%, then you have basically a voting share for you to vote on anything, then of course, you would win the vote at that point in time. So let’s consider then direct control and indirect control direct control when one company has a majority of another company’s stock common stock. So that would be a situation where you got a and b, one company has a majority interest over 51% control is pretty easy to see at that point. When you start to get into indirect control. This can get more complicated things can get more confusing here. So indirect control, one company’s common stock is owned by one or more other companies that are under common control. So this can get a lot more detailed structure in terms of what is going to constitute control. So for example, if we have direct control, then you have just simply a parent subsidiary type of relationship. And, you know, the parent has more than 51% of the subsidiary, interest common stock. So and that could happen if we have to, we could still have a little bit more complexity here, where we have two subsidiaries, right. But they’re both going to be consolidated in this case, because there’s 75% over 51% direct control is parent over as one direct control over as to here because it’s over the 51%. So both of these cases would be direct control.
Advanced financial accounting. In this presentation we’re going to talk about a consolidation for a non wholly owned subsidiary. So in other words, we have a parent subsidiary relationship, but the parent doesn’t own 100% of the outstanding common stock of the subsidiary but something other than 100%. In other words, over 51% controlling interest less than 100% get ready to account with advanced financial accounting. Non controlling interest often will be represented NCI non controlling interest. So notice if we have a parent subsidiary relationship we’re talking about there is some controlling interest, the controlling interest is the interest that’s going to be over 51%. However, if we don’t have 100% ownership, then we have the amount that’s not in control and that of course is going to be the non controlling interest. So non controlling interest. NCI controlling interest is needed for consolidation. Obviously, if we’re going to consolidate this thing, that means typically that A parent has some controlling interest over 51% a 100% is not needed. So 100% of ownership, in other words, by one parent to the other is not necessary for a consolidation to take place control is necessary, which is typically over 51% less than 100% ownership will result in a non controlling shareholder, those other than the parent.
Advanced financial accounting. In this presentation we’re going to take a look at the usefulness of consolidated financial statements. In other words, consolidated financial statements taking two or more companies where there’s a parent subsidiary relationship, putting them together representing financial statements as if those entities were one entity. What are the pros and cons of using consolidated financial statements? Get ready to account with advanced financial accounting idea of consolidated financial statements? In other words, why did we come up with the consolidated financial statements? So remember, we’re talking about a situation where there’s a parent subsidiary relationship, there’s a controlling interest, we have one company that has a controlling interest in over 51 interest in the other company. And then we’ve come up with this concept of showing the Consolidated Financial Statements showing the entity the parent and the subsidiary entities of which there’s a controlling interest as if they were one entity. Why do that? So when company creates or gets controlled Another company, that’s going to be the scenario we have. So we have a parent subsidiary relationship due to that fact due to one company having control than another company. You can think of that, of course in a stock situation owning for more than 51%. The result is a parent subsidiary relationship. So if we just have the two entities, it would look something like this.
Advanced financial accounting PowerPoint presentation. In this presentation we’ll talk about consolidation and income taxes get ready to account with advanced financial accounting. For a non taxable acquisition, the tax basis of assets acquired and liabilities assumed is not changed from the acquisition. In this case, then the carrying basis is the acquire ease basis, the acquiring company needs to identify all assets and liabilities acquired and their fair market value when the acquisition takes place, and then the deferred tax assets or liabilities that are from the difference between the fair market value and the tax basis when allocating the purchase price must be recorded by the acquiring company. So we have the tax expense allocation. When consolidated return is filed. What are we going to do with this tax expense allocation, the parent company and subsidiaries can file a consolidated income tax return or they can choose to file separate returns. So this is one of the things that we kind of have to consider here we’ve got a controlling interest that’s going to be involved. So we have two entities, one has a controlling interest and the other obviously parents subsidiary type of relationship question, then should we report just one tax return? Or should we have two tax returns, this is going to be a decision that needs to be made. But if we file one tax return, then at least 80% of its stock must be held by the parent company or another company included in the consolidation return for a subsidiary to be eligible to be included in a consolidated tax return.