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    When a company owns more than 50% of another company's shares, it must publish consolidated group accounts including transactions from both companies. Consolidated accounts combine the parent company's balance sheet with its subsidiaries'. This document provides two examples of consolidated balance sheets. In the first case, the parent wholly owns the subsidiary, so their balance sheets are consolidated line by line. In the second case, the parent owns 80% of the subsidiary, so the consolidated balance sheet includes a non-controlling interest line for the other shareholders' 20% portion of the subsidiary's net assets. Goodwill is also calculated in both examples as the difference between the parent's investment and its share of the subsidiary's net assets.

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    Consolidated accounts

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    When a company owns more than 50% of another company's shares, it must publish consolidated group accounts including transactions from both companies. Consolidated accounts combine the parent company's balance sheet with its subsidiaries'. This document provides two examples of consolidated balance sheets. In the first case, the parent wholly owns the subsidiary, so their balance sheets are consolidated line by line. In the second case, the parent owns 80% of the subsidiary, so the consolidated balance sheet includes a non-controlling interest line for the other shareholders' 20% portion of the subsidiary's net assets. Goodwill is also calculated in both examples as the difference between the parent's investment and its share of the subsidiary's net assets.

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    3 views3 pages

    Consolidated Accounts

    Uploaded by

    husse fok
    When a company owns more than 50% of another company's shares, it must publish consolidated group accounts including transactions from both companies. Consolidated accounts combine the parent company's balance sheet with its subsidiaries'. This document provides two examples of consolidated balance sheets. In the first case, the parent wholly owns the subsidiary, so their balance sheets are consolidated line by line. In the second case, the parent owns 80% of the subsidiary, so the consolidated balance sheet includes a non-controlling interest line for the other shareholders' 20% portion of the subsidiary's net assets. Goodwill is also calculated in both examples as the difference between the parent's investment and its share of the subsidiary's net assets.

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    © All Rights Reserved
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    Consolidated accounts

    When a company has one or more companies in which it has more than 50 % shares, it is required to publish group accounts to include transactions of the other
    companies as well.
    The following definitions will be useful:

    Parent undertaking (previously parent company) – A company which has purchased more than 50% of the shares in another company.

    Subsidiary undertaking(previously subsidiary company) – A company in which another company(Parent undertaking) owns more than 50% of the shares.

    The accounts of these two companies have to be published as consolidated group accounts (Consolidated Income statement and consolidated Balance sheet)

    At this stage we shall be concerned with the consolidated Balance Sheet of one parent undertaking and one subsidiary undertaking.

    Case 1
    Wholly owned subsidiary
    In this case and those to come we have named the parent undertaking P and the subsidiary undertaking S.

    Their Balance sheets at 31.12.11 were as follows:


    P (Balance Sheet as at 31.12.11)
    $
    Investment in subsidiary 23
    Inventory 7
    Bank 5
    35
    Equity- 20
    Retained earnings 9
    General reserve 6
    35

    S (Balance Sheet as at 31.12.11)


    $

    Inventory 15
    Bank 2
    17
    Equity 10
    Retained earnings 4
    General reserve 3
    17
    P and S (Consolidated Balance sheet as at 31.12.11)
    $
    Goodwill 6
    Inventory 22
    Bank 7
    35
    Equity 20
    Retained earnings 9
    General Reserve 6
    35

    Goodwill = Investment in sub less proportion of net assets= 23 – ( 10+4+3) ×100%= $6


    Case 2
    Partly owned subsidiary- P owns 8 (80%) shares in S
    P (Balance Sheet as at 31.12.05)
    $
    Investment in subsidiary-8 shares 26
    Inventory 13
    Bank 6
    45
    Equity 20
    Retained earnings 17
    General reserve 8
    45
    S (Balance Sheet at 31.12.05)
    $

    Inventory 21
    Bank 9
    30
    Equity- 10 shares 10
    Retained earnings 5
    General reserve 15
    30
    P and S (Consolidated Balance Sheet as at 31.12.05)
    $
    Goodwill 2
    Inventory 34
    Bank 15
    51
    Equity 20
    Retained earnings 17
    General Reserve 8
    Non controlling interest 6
    51

    Workings:
    Note: Non controlling interest represents the proportion of Net assets held by other shareholders in the subsidiary undertaking.

    Total P-80% Non controlling interest


    20%
    Capital $10 $8 $2
    Profit &loss $5 $4 $1
    General reserve $15 $12 $3
    $30 $24 $6
    Or simply
    Parents share of net asset = 80% × 30 = 24
    Subs share = 20%× 30= 6
    Goodwill= Inv – Net assets = 26 – 24= 2

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