Methods of consolidating subsidiaries

23 May

First, the investment is recorded at cost, and then adjustments are made either up or down, depending on the venture's current value and the expenses associated with it.In business, consolidation or amalgamation is the merger and acquisition of many smaller companies into much larger ones.These choices permitted the use of one of three methods to measure these investments: the cost method, the equity method, or as available for sale financial assets in accordance with IAS 39 Financial Instruments: Recognition and Measurement.As part of its improvements process in preparation for the adoption of IFRS in Europe and other countries from 2005, the IASB amended and renamed these standards and consolidated the requirements for the measurement of investments in separate financial statements within IAS 27 Consolidated and Separate Financial Statements.Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.Prior to 2005, IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries, IAS 28 Accounting for Investments in Associates, and IAS 31 Financial Reporting of Interests in Joint Ventures contained requirements for the measurement of investments in subsidiaries, joint ventures and associates in the separate financial statements of the investor.

The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

Treatment to the acquired company: The acquired company records in its books the elimination of its net assets and the receipt of cash, receivables or investment in the acquiring company (if what was received from the transfer included common stock from the purchasing company).

Let’s be more practical today and learn some advanced accounting techniques.

IFRS 10 Consolidated Financial Statements outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls.

Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee.