会计专业英语：第九课 Consolidated Statements

ConsolidatedStatementsConsolidationoramalgamationistheactofmergingmanythingsintoone.Inbusiness,itoftenreferstothemergersandacquisitionsofmanysmallercompaniesintomuchlargerones.Inthecontextoffinancialaccounting,consolidationreferstotheaggregationoffinancialstatementsofagroupcompanyasaconsolidatedaccount.Thetaxationtermofconsolidationreferstothetreatmentofagroupofcompaniesandotherentitiesasoneentityfortaxpurposes.TypesofbusinessconsolidationTherearethreeformsofbusinesscombinations:StatutoryMerger:abusinesscombinationthatresultsintheliquidationoftheacquiredcompany’sassetsandthesurvivalofthepurchasingcompany.StatutoryConsolidation:abusinesscombinationthatcreatesanewcompanyinwhichnoneofthepreviouscompaniessurvive.StockAcquisition:abusinesscombinationinwhichthepurchasingcompanyacquiresthemajority,morethan50%,oftheCommonstockoftheacquiredcompanyandbothcompaniessurvive.Amalgamation:MeansanexistingCompanywhichistakenoverbyanotherexistingcompany.Insuchcourseofamalgamation,theconsiderationmaybepaidin"cash"orin"kind",andthepurchasingcompanysurvivesinthisprocess.TerminologyParent-subsidiaryrelationship:theresultofastockacquisitionwheretheparentistheacquiringcompanyandthesubsidiaryistheacquiredcompany.ControllingInterest:Whentheparentcompanyownsamajorityofthecommonstock.Non-ControllingInterestorMinorityInterest:therestofthecommonstockthattheothershareholdersown.Whollyownedsubsidiary:whentheparentownsalltheoutstandingcommonstockofthesubsidiary.Companyisformedwhenintheprocessoftheamalgamation,thecombinedcompanyisformedoutofthetransaction.Theamalgamatedcompanyisotherwisecalledthetransfereecompany.Thecompanyorcompanies,whichmergeintothenewcompany,arecalledthetransferorcompaniesand,thecompany,intowhichthetransferorcompaniesmerge,isknownasthetransfereecompany."Amalgamatingcompany"

:Thecompanyorcompanies,whicharemerged,arecalledthe"amalgamatingcompanies".Theamalgamatingcompanyorcompaniesarealsocalledthe"transferorcompany/companies."dsdAccountingtreatment(USGAAP)

Aparentcompanycanacquireanothercompanyintwoways:Bypurchasingthenetassets.Bypurchasingthecommonstockofanothercompany.Regardlessofthemethodofacquisition;directcosts,costsofissuingsecuritiesandindirectcostsaretreatedasfollows:Directcosts,Indirectandgeneralcosts:theacquiringcompanyexpensesallacquisitionrelatedcostsastheyareincurred.Costsofissuingsecurities:thesecostsreducetheissuingpriceofthestock.PurchaseofNetAssetsTreatmenttotheacquiringcompany:Whenpurchasingthenetassetstheacquiringcompanyrecordsinitsbooksthereceiptofthenetassetsandthedisbursementofcash,thecreationofaliabilityortheissuanceofstockasaformofpaymentforthetransfer.Treatmenttotheacquiredcompany:Theacquiredcompanyrecordsinitsbookstheeliminationofitsnetassetsandthereceiptofcash,receivablesorinvestmentintheacquiringcompany(ifwhatwasreceivedfromthetransferincludedcommonstockfromthepurchasingcompany).Iftheacquiredcompanyisliquidatedthenthecompanyneedsanadditionalentrytodistributetheremainingassetstoitsshareholders.PurchaseofCommonStockTreatmenttothepurchasingcompany:Whenthepurchasingcompanyacquiresthesubsidiarythroughthepurchaseofitscommonstock,itrecordsinitsbookstheinvestmentintheacquiredcompanyandthedisbursementofthepaymentforthestockacquired.Treatmenttotheacquiredcompany:Theacquiredcompanyrecordsinitsbooksthereceiptofthepaymentfromtheacquiringcompanyandtheissuanceofstock.FASB141DisclosureRequirements:FASB141requiresdisclosuresinthenotesofthefinancialstatementswhenbusinesscombinationsoccur.Suchdisclosuresare:Thenameanddescriptionoftheacquiredentityandthepercentageofthevotingequityinterestacquired.Theprimaryreasonsforacquisitionanddescriptionsoffactorsthatcontributedtorecognitionofgoodwill.Theperiodforwhichresultsofoperationsofacquiredentityareincludedintheincomestatementofthecombiningentity.Thecostoftheacquiredentityandifitappliesthenumberofsharesofequityinterestissued,thevalueassignedtothoseinterestsandthebasisfordeterminingthatvalue.Anycontingentpayments,optionsorcommitments.Thepurchaseanddevelopmentassetsacquiredandwrittenoff.Treatmentofgoodwillimpairments:IfNon-ControllingInterest(NCI)basedonfairvalueofidentifiableassets:impairmenttakenagainstparent'sincome&R/EIfNCIbasedonfairvalueofpurchaseprice:impairmenttakenagainstsubsidiary'sincome&R/EReportingintercorporateinterest—investmentsincommonstock1.20%ownershiporless:Whenacompanypurchases20%orlessoftheoutstandingcommonstock,thepurchasingcompany’sinfluenceovertheacquiredcompanyisnotsignificant.(APB18specifiesconditionswhereownershipislessthan20%butthereissignificantinfluence).Thepurchasingcompanyusesthecostmethodtoaccountforthistypeofinvestment.Underthecostmethod,theinvestmentisrecordedatcostatthetimeofpurchase.Thecompanydoesnotneedanyentriestoadjustthisaccountbalanceunlesstheinvestmentisconsideredimpairedorthereareliquidatingdividends,bothofwhichreducetheinvestmentaccount.Liquidatingdividends

:Liquidatingdividendsoccurwhenthereisanexcessofdividendsdeclaredoverearningsoftheacquiredcompanysincethedateofacquisition.Regulardividendsarerecordedasdividendincomewhenevertheyaredeclared.Impairmentloss

:Animpairmentlossoccurswhenthereisadeclineinthevalueoftheinvestmentotherthantemporary.2.20%to50%ownership—AssociatecompanyWhentheamountofstockpurchasedisbetween20%and50%ofthecommonstockoutstanding,thepurchasingcompany’sinfluenceovertheacquiredcompanyisoftensignificant.Thedecidingfactor,however,issignificantinfluence.Ifotherfactorsexistthatreducetheinfluenceorifsignificantinfluenceisgainedatanownershipoflessthan20%,theequitymethodmaybeappropriate(FASBinterpretation35(FIN35)underlinesthecircumstanceswheretheinvestorisunabletoexercisesignificantinfluence).Toaccountforthistypeofinvestment,thepurchasingcompanyusestheequitymethod.Undertheequitymethod,thepurchaserrecordsitsinvestmentatoriginalcost.Thisbalanceincreaseswithincomeanddecreasesfordividendsfromthesubsidiarythataccruetothepurchaser.

TreatmentofPurchaseDifferentials:Atthetimeofpurchase,purchasedifferentialsarisefromthedifferencebetweenthecostoftheinvestmentandthebookvalueoftheunderlyingassets.Purchasedifferentialshavetwocomponents:Thedifferencebetweenthefairmarketvalueoftheunderlyingassetsandtheirbookvalue.Goodwill:thedifferencebetweenthecostoftheinvestmentandthefairmarketvalueoftheunderlyingassets.Purchasedifferentialsneedtobeamortizedovertheirusefullife;however,newaccountingguidancestatesthatgoodwillisnotamortizedorreduceduntilitispermanentlyimpaired,ortheunderlyingassetissold.3.Morethan50%ownership—SubsidiaryWhentheamountofstockpurchasedismorethan50%oftheoutstandingcommonstock,thepurchasingcompanyhascontrolovertheacquiredcompany.Controlinthiscontextisdefined