TORALDE, MA.KRISTINE E.

CBET-01-601A

The learning resource video talks about the consolidation principles,

consolidation is where an entity acquires another entity making a parent and subsidiary

relationship which parent has the control over the subsidiaries for which the parent has

the ability to direct on the relevant activities of the subsidiary, parent has the power.

Talking about the control, we can recall that when we are first year our professor told us

that you can have the control when you have more than 50 percent ownership but not

on all cases there can be a control even you own less than 50 percent ownership

interest on top of that there’s a lot to consider for a parent to have a control which are

the special assessment of control, actually not just control but also significant influence.

When there’s a parent and subsidiary relationship there must be a consolidated

financial statement where it combine assets, liabilities and other financial items of two or

more entities to assess the performance of the group and is used by the relevant

shareholders to make a decision for the company. In our previous discussion there are

items that we cannot see in the consolidated financial statement that we can see in the

parent financial statement and vice versa. Also mentioned in the video the principle of

consolidation which are eliminating of intra-group transactions and investment account

is unnecessary because they are considered as one entity, uniform accounting policies

is a must of course because they are going to combine all financial items in one

statement, same reporting date, allocation of comprehensive income and equity to NCI

and the accounting for changes in ownership interest and losing control.