Scribd
Upload
44 views2 pages

ACTG 4P34 Chapter8 Part1

Uploaded by

Harry Yang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
44 views2 pages

ACTG 4P34 Chapter8 Part1

Uploaded by

Harry Yang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

ACTG 4P34

CHAPTER 8 –CONSOLIDATED CASH FLOWS & OWNERSHIP ISSUES

A. CASH FLOW STATEMENT

- Constructed by using the consolidated balance sheet and income statement


- Adjust net income for non-cash items, including:
o AD Fair Value adjustment amortizations
o NCI allocation of net income
o Dividends paid to the parent by the subsidiary (dividends to NCI do reduce cash)
- Special disclosures are required in the year a subsidiary is acquired:
o Only the net cash outflow from a business combination is presented in the cash
flow statement
o Details of the noncash accounts affected by the combination are disclosed in the
notes to the financial statements
o Only the net cash inflow is presented in the cash flow statement
o Details of the noncash accounts affected by the disposition are disclosed in the
notes to the financial statements

B. CHANGES IN PARENT’S OWNERSHIP INTEREST

- Ownership % of the Parent will change when:


o Parent purchases additional shareholdings
o Parent sells some of its holdings
o Subsidiary issues new shares and Parent does not maintain its ownership %
o Subsidiary repurchases some its common shares from non-controlling interests

1. Ownership increases – Block Purchases


o If no significant influence or control – “available for sale” investment (FVTPL)
 Report @ FMV at each report date
o Once significant influence is present – equity method reporting
o Use entire block of shares at this time to determine the AD
 Acquisition cost = C.V. of shares previously purchased plus the cost of the
current purchase that led to significant influence (i.e. should equal FV for
total shares owned, since previous shares would be at FV under FVTPL)
 AD = Acquisition cost – (BV of Acquiree x P’s share)
o Additional block(s) of shares acquired = new AD calculation, based on % acquired
 Original AD calculation(s) are carried forward and not adjusted to FV
o Once control exists – consolidation begins
 Subsidiary is re-valued to FV with gains/losses posted to income
 Any previously unrecognized gains/loss related to investment (including
those in OCI) are transferred to net income
 AD recalculated based on full % ownership at time of control
 No adjustment to FV post-consolidation (i.e. post-control)
o Post-control purchases – no separate AD calculation or revaluation of the
existing AD; transactions treated as equity transactions
o NCI decreases when Parent purchases additional % share of the subsidiary
 Acquire % of Sub’s shareholder’s equity (adjusted for unrealized profits
and Unamortized AD)
 E.g. if NCI % is 20% and 10% block is acquired by Parent, 50% of NCI’s
share of Unamortized AD is being shifted to Parent
o Price Paid – Relative % of NCI share of sub’s adjusted equity = Gain/loss on NCI
sale to Parent; this amount is posted directly to consolidated R/E
o Numerous small purchases can be grouped together and treated as a block
purchase
o Consolidated R/E Calculation
 Adjust Parent’s R/E for fair value adjustment @ time of acquisition
 Adjust Sub’s R/E for each AD amortization since control obtained
o Include Parent’s share of increase in Sub’s R/E based on the % owned during
each period (e.g. 2 years @ 60%, 6 years at 80%)

You might also like