Consolidations & Group Accounts Flashcards
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Read the first 7 Consolidations & Group Accounts flashcards as text
What is the primary purpose of consolidated financial statements?
Answer: To present the financial position and results of a parent and its subsidiaries as a single economic entity
Consolidated financial statements combine the parent and its subsidiaries into a single economic entity, giving users a comprehensive view of the entire group's financial position and performance.
Under ASC 810, which condition primarily determines whether a parent controls a subsidiary?
Answer: Having the power to direct the activities that most significantly affect the entity's economic performance
ASC 810 defines control based on the power to direct the activities that most significantly affect the entity's economic performance, which can occur at ownership levels below 51%.
How is goodwill calculated under the acquisition method of accounting?
Answer: Fair value of consideration paid plus non-controlling interest minus fair value of net identifiable assets acquired
Goodwill equals the sum of the fair value of consideration transferred plus NCI plus any previously held equity interest, minus the fair value of the net identifiable assets acquired at the acquisition date.
How is non-controlling interest (NCI) presented in consolidated financial statements under US GAAP?
Answer: As a separate component of equity in the consolidated balance sheet
Under ASC 810, NCI is presented as a separate component of consolidated stockholders' equity, not as a liability or a reduction of the parent's equity.
Under the acquisition method, at what value are the acquired company's identifiable assets and liabilities measured?
Answer: At fair value on the acquisition date
The acquisition method requires that all identifiable assets acquired, liabilities assumed, and NCI be measured at their fair values on the acquisition date.
Under US GAAP (ASC 350), how is goodwill accounted for after initial recognition?
Answer: Not amortized but tested for impairment at least annually
Under ASC 350, goodwill is not amortized but must be tested for impairment at the reporting unit level at least annually, or more frequently when triggering events indicate a potential impairment.
Which of the following intercompany transactions must be eliminated when preparing consolidated financial statements?
Answer: Sales from the parent company to a consolidated subsidiary
Intercompany sales between entities within the consolidated group are eliminated to prevent double-counting of revenues and expenses; transactions with external parties are not eliminated.