高级会计学英文版资料：Chap004 Consolidated Financial Statements and Outside Ownership

1、Chapter FourConsolidated Financial Statements and Outside OwnershipDo not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling InterestAlthough most parent companies do possess 100 percent ownership of their subsidiaries, a significant numbe

2、r establish control with a lesser amount of stock.If the parent doesnt own 100% of the company, WHO owns the rest of it?Noncontrolling ShareholdersThe ownership interests of the Noncontrolling Shareholders must be reflected in the consolidated financial statements.4-2LO 14-2Do not pervert justice; d

3、o not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling Interest4-3The Parent, with controlling interest, must consolidate 100% of the Subsidiarys financial information. The acquisition method requires that the subsidiary be valued at the acquisition-date fair v

4、alue. The total acquired firm fair value in a partial acquisition is the sum of The fair value of the controlling interest. The fair value of the noncontrolling interest at the acquisition date. LO 24-3Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus

5、19:15)Noncontrolling Interest ExampleParker purchased 9,000 shares at $70 per share. The fair value of their consideration transferred is $630,000. The remaining 1,000 shares trade at $60 per share indicating that the fair value of the noncontrolling interest is $60,000. The total acquisition-date f

6、air value of the sub is $690,000. Fair value of controlling interest :($70 X 9,000 shares) . . . . . . . . . . . . . . . $630,000Fair value of noncontrolling interest ($60 X 1,000 shares) . . . . . . . . . . . . . . . . . 60,000Total fair value of sub. . . . . . . . . . . . . . $690,0004-4Do not per

7、vert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling Interest ExampleControlling InterestNoncontrolling InterestTotalFair value at acquisition date630,00060,000690,000Fair value of identifiable net assets acquired 540,00060,000600,000Goodwill90

8、,000090,000Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling Interest ExampleThe total acquisition-date fair value (amount paid) of Strong of $690,000 is greater than the fair value of the identifiable net assets acquired of $600,0

9、00 (10,000 shares x $60 per share). The difference is allocated to Goodwill.The parent first allocates goodwill to its controlling interest for the excess of the fair value of the parents equity interest over its share of the fair value of the net identifiable assets. ($600,000 X 90% = 540, 000). Go

10、odwill allocated to the controlling and noncontrolling interests will not always be proportional to the percentages owned.LO34-6Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Allocating Subsidiarys Net IncomeThe subsidiarys net income (includi

11、ng excess acquisition-date fair-value amortizations) must be allocated to its owners - the parent and the noncontrolling interest - to properly measure their respective equity in the consolidated entity.On the Income Statement:An account called Noncontolling Interest in Subsidiary Net Income represe

12、nts the noncontrolling shareholders share of the subs net income.This account is created during consolidation and reported in the worksheet entries.4-7Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Lets take our original example one step furth

13、er.Parker owns 90% of Strong.Assume Strong earns $80,000 in the first year Parker has control.$30,000 of annual excess fair value amortization results from increasing Strongs acquisition- date book values to fair value.Noncontrolling Interest Example P1504-8Do not pervert justice; do not show partia

14、lity to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling Interest - ExampleNoncontrolling Interest in Strong Company Net IncomeRevenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $280,000Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000

15、Subsidiary Strong net income . . . . . . . . . . . . . . . . 80,000Excess acquisition-date fair-value amortization. . . 30,000Net income adjusted for excess amortizations. . . $ 50,000Noncontrolling interest percentage . . . . . . . . . . . . . . 10%Noncontrolling interest in Strong net income. . .

16、. . $ 5,000Note: The noncontrolling shareholders have a 10% interest in the subsidiary company, but no interest in the parent firm.4-9Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling Interests and ConsolidationsThe consolidation p

17、rocess remains substantially unchanged with a noncontrolling interest. Consolidate as though the Parent has 100% ownership, and then determine the noncontrolling interest in:The subsidiary as of the beginning of the current year.The subsidiarys current year net income.The subsidiarys dividend paymen

18、ts.4-10股权投资的抵销企业集团母公司长期股权投资投资收益现金股利子公司所有者权益净利润利润分配股权投资母公司股东非控制股东Consolidated Financial StatementIncome Statement Noncontrolling interests in the equity of subsidiaries are reported in the owners equity section of the consolidated statement of financial position. The amount should be clearly identifi

19、ed, labeled, and distinguished from the parents controlling interest in its subsidiaries. Also consolidated net income (or loss) and each component of other comprehensive income must be allocated to the controlling and noncontrolling interests.4-12Do not pervert justice; do not show partiality to th

20、e poor or favoritism to the great. (Leviticus 19:15)Noncontrolling Interest -Worksheet ExampleNoncontrolling Interest -Worksheet Example P1524-13To illustrate: Assume that King Co. acquires 80% of Pawn Cos 100,000 outstanding voting shares on January 1, 2012, for $9.75 per share or a total of $780,0

21、00 cash. Further assume that the 20% noncontrolling interest shares trade before and after the acquisition at an average of $9.75 per share. The total fair value of Pawn to be used initially in consolidation is thus as follows:Consideration transferred by King. . . . . . . . . . . $780,000Noncontrol

22、ling interest fair value . . . . . . . . . . . . 195,000Pawns total fair value at January 1, 2012 . . . $975,000Noncontrolling Interest -Worksheet ExampleNote: Comparing the total fair value based on the stock value of $975,000 to the fair value of identifiable net assets shown above, it appears Paw

23、n has goodwill valued at $25,000. （Exhibit 4.3）4-14Changes in Subs R/E Current year (2013) Net income $90,000 Less: Dividends paid (50,000) Increase in R/E$40,000Prior years (2012) Increase in R/E$70,000Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus

24、 19:15)Subs EquityParent80%NCI20%BVFVBVFV12.1.1740,000235,000975,000780,000195,000R/E +70,000-10,00060,000+48,000+12,00013.1.1810,000225,000828,000207,000Net income90,000-10,00080,000+64,000+16,000Dividends-50,000-40,000-10,00013.12.31850,000215,000852,000213,000Do not pervert justice; do not show p

25、artiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling Interest -Worksheet ExampleKing uses the Equity Method to account for Pawn subsequent to acquisition. The consolidation process is substantially the same. At each consolidation, we will prepare the worksheet with the e

26、ntries we referenced as S, A, I, D, and E, ANDWe will add a column to our worksheet where we will record the noncontrolling interest in the subsidiary.4-17Noncontrolling Interest -Worksheet Example4-18Noncontrolling Interest -Worksheet Example4-19ContinuedNoncontrolling Interest Worksheet Example4-2

27、0Noncontrolling Interest Worksheet Example4-21Consolidated Financial StatementIncome Statement 4-22Consolidated Financial StatementBalance Sheet 4-23Noncontrolling Interest Premium Paid -P160If King had paid $11.00 for their shares, at a time when they were trading for $9.75, then the goodwill alloc

28、ation would look like this: $11.00 x 80,000 shares$9.75 x 20,000 sharesAcquisition-date FV4-24Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling interest-FASBMeasurement : Fair valueGoodwill:FV of consideration paid by Parent+ FV of

29、 Noncontrolling interest=FV of Sub-FV of Subs identifiable net assets=Goodwill of Sub, consists ofParents interest in Goodwill, andNoncontrolling interest in GoodwillDo not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Noncontrolling interest -CASNo

30、ncontrolling interest:= FV of Subs identifiable net assets x % of NCIDo Not recognize Goodwill of Noncontrolling interestGoodwill:FV of consideration paid by Parent co-FV of Subs identifiable net assetsx the parents ownership %=Goodwill, i.e. Parents interest in GoodwillDo not pervert justice; do no

31、t show partiality to the poor or favoritism to the great. (Leviticus 19:15)Effects of using the Initial Value MethodThe initial value method employs cash basis for income recognition. The parent recognizes dividend income rather than an equity income accrual. Parent does not accrue the percentage of

32、 the subs income earned in excess of dividends (the increase in subsidiary retained earnings). The parent does not record amortization expense, therefore it must include it in the consolidation process if proper totals are to be achieved. 4-27Do not pervert justice; do not show partiality to the poo

33、r or favoritism to the great. (Leviticus 19:15)Effects of using the Initial Value MethodIf the Parent used the Initial Value Method to account for the Sub after acquisition, Entry *C is used to convert to the Equity Method. The entry will combine the increase in the Subs Retained Earnings since acqu

34、isition X the parents percentage of ownership, and the parents share of amortization expense since acquisition.Entry D is not necessary. 4-28Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Effects of using the Partial Equity MethodEntry *C conv

35、erts from the Partial Equity Method to the Equity Method, but only the adjustment for the parents share of amortization expense is necessary. If the Parent used the Partial Equity Method to account for the Subsidiary after acquisition, Entry *C is used to convert to the Equity Method.4-29Do not perv

36、ert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Mid-Year AcquisitionsWhen control of a Sub is acquired at a time subsequent to the beginning of the subs fiscal year:The income statements are consolidated as usualThe Subs pre-acquisition revenues and expen

37、ses are excluded from the Parents consolidated statements (adjusted via Entry S)Only a partial years amortization on excess fair value is taken. LO 84-30Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Step Acquisitions When a Parent acquires a

38、Subsidiary over time, or in “steps,” the date control is achieved is significant All previous values for the investment, prior to the date control is obtained, are remeasured to fair value as of the date of control. If after obtaining control, the parent increases its ownership interest in the subsi

39、diary, no further remeasurement takes place.LO 94-31Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Leviticus 19:15)Sales of Subsidiary StockIf the parent maintains control, it recognizes no gains or losses the sale is shown in the equity section.If the sale r

40、esults in the loss of control, the parent recognizes any resulting gain or loss in consolidated net income.What is reported on the consolidated statements when a Parent sells some of its ownership in a Subsidiary? LO 104-32Do not pervert justice; do not show partiality to the poor or favoritism to the great. (Levit