Bryle Jay P Lape

In a Nutshell.

1. Consolidation after the date of acquisition is a complex task. One should be able to
accurately record the journal entries and necessary elimination entries for
consolidation.

2. The process of consolidation subsequent to date of acquisition requires a Statement

of Financial Position, Statement of Comprehensive Income, and Retained Earnings
Statement.

3. In consolidating, parent’s assets, liabilities, equity, etc are combined with those of
the subsidiary. Then, eliminate the carrying amount of the investment of the parent by
debiting Common Stock/Shares account. Lastly, eliminate all accounts related to the
intercompany transactions.

4. Parent company approach requires the accrual of all income, in wholly-owned

subsidiaries, from the parent and its subsidiary are weighted to parent company, while
in partially-owned subsidiaries, only the income from controlling interest is accrued to
parent company.

5. Entity approach slightly differs from parent company approach. Though they are
the same in accruing income for wholly-owned subsidiaries, they differ in partially-
owned subsidiaries because this approach consider the income from non-controlling
interest in the consolidated statement of comprehensive income.

6. Under IAS 27, investments in subsidiaries shall be accounted either: (1) at cost,
where in investment account is recognized at its cost; (2) at fair value method, where
measurements of its fair value is in accordance with IFRS 9 standard; and (3) equity
method under PAS 28, if the acquirer gains significant influence by owning at least
20% but less than 50% of the voting power of the entity.

7. Subsequent years after date of acquisition is accounted the same as the year of
acquisition. Any dividends paid by the acquired company is eliminated in
consolidated statements together with the investment and equity at the date of
acquisition.

8. Ineliminating dividends paid, Dividend Income account is debited and Dividends

declared account of the acquired company will be credited.