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Accounting Instruction

Direct & Indirect Control

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

 

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.

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Accounting Instruction

Internal Business Expansion

Written by Bob Steele CPA - Accounting Instruction, Help & How To on . Leave a comment

In this presentation, we’ll take a closer look at internal business expansion, get ready to act because it’s time to account with advanced financial accounting. In our previous presentation, we talked about the types of expansion that a company can take. And we broke those out into the general categories of internal expansion and external expansion. The internal expansion, meaning we have a corporation or a company that needs to expand wants to do so internally might result in other divisions or might result in a creation of a subsidiary, the external expansion meaning we have two entities that are separate and somehow come together, which still could result in something like a parent subsidiary type relationship, or some type of division. So we’re going to be considered here the internal ideas the internal concept or internal expansion. So we have one organization, the organization wants to grow and expand possibly into a different sections or segments are different industry, and therefore they’re going to expand in some way shape. shape or form. Typically, we’re thinking of the creation in this case of a subsidiary type of relationship, in which case, they might create a separate legal entity. And that would be the giving of the assets and possibly liabilities to a separate legal entity that would be created. In other words, the parents company, setting up a subsidiary in some way, shape or form. And then given the subsidiary some assets and the liabilities that were formerly the parents organization, and then having a parent subsidiary type relationship with that subsidiary unit, us from an accounting standpoint, then having to think about how are we going to account for that with regards to financial accounting with that parent subsidiary type of relationships. So types of business entities that could be involved with this, we could have a subsidiary company and that’s the one you’d probably most be considering.

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