Presentation on Pre Acquisition and Post

Acquisition, Cost of Control and Maturity

Interest
Name – Shreyash Gangwar
Roll no – 19/92959
Pre - Acquisition
Pre-acquisition profits are the reserves which exist in a subsidiary
company at the date when it is acquired. These are included in the goodwill
calculation. It is the profit earned by the company before it is being acquired.

GENERAL RESERVE Of Subsidiary Company

PRE ACQUSITION reserves are treated as capital reserves and adjusted
against goodwill.

SURPLUS OF THE Subsidiary Company

PRE ACQUSITION profits are treated as capital profits and included in the
capital reserves to be adjusted against goodwill.
Post – Acquisition

Post-acquisition profits are profits made and included in the retained earnings of

the subsidiary company since acquisition. They are included in group reserves.

GENERAL RESERVE Of Subsidiary Company

POST- ACQUSITION reserves are added to the general reserves of the holding
company.

SURPLUS OF THE Subsidiary Company

POST ACQUSITION profits are treated as revenue profits and added to the surplus
or profits of the holding company.
General Rules
 The balance in the general account and surplus of the subsidiary
company appearing at the date of acquisition of shares by
holding company in its balance sheet will be regarded as capital
profits / reserves as the case may be by the holding company.
 Capital reserves of holding company should be adjusted with
goodwill if any for the simple reason that both capital reserves
and goodwill should not be shown simultaneously in the balance
sheet .
 There is no need to make a distinction between pre and post
acquisition profits / reserves while calculating the shares of the
minority interest .
Cost of Control
 Cost Control is the practice of identifying and reducing
business expenses to increase profits, and it starts with the 
budgeting process. A business owner compares the
company's actual financial results with the budgeted
expectations, and if actual costs are higher than planned,
management has the information it needs to take action.
 As an example, a company can obtain bids from different

vendors that provide the same product or service, which can

lower costs. Cost control is an important factor in maintaining
and growing profitability.
Minority Interest
 A minority interest is ownership or interest of less than 50% of an
enterprise. The term can refer to either stock ownership or a
partnership interest in a company. The minority interest of a
company is held by an investor or another organization other than
the parent company. Minority interests generally come with some
rights for the stakeholder such as the participation in sales and
certain audit rights.
 A minority interest shows up as a noncurrent liability on the balance

sheet of companies with a majority interest in a company. This

represents the proportion of its subsidiaries owned by minority
shareholders.
Thank You