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f3 - Copyright Doug Hillman 2000 Parent/Subsidiary When...

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© Copyright Doug Hillman 2000 Business Consolidations
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© Copyright Doug Hillman 2000 Parent/Subsidiary When investor owns more than 50% of voting stock of another company, assume ability to control Investor company is parent Investee company is subsidiary
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© Copyright Doug Hillman 2000 Consolidated Financial  Statements Parent and subsidiary may be separate legal entities For reporting, view as single economic entity Consolidated financial statements show financial position and operating results of combined companies FASB No. 94 requires consolidation when parent has controlling interest
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© Copyright Doug Hillman 2000 Reciprocal Accounts Accounts in two separate sets of books that represent a common element and will cancel each other out Investment on parents books and owners’ equity on subsidiaries For intercompany transactions Accounts receivable and accounts payable Sales and cost of goods sold
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© Copyright Doug Hillman 2000 Consolidating Combine similar accounts from the separate financial statements of parent and subsidiary Eliminate reciprocal accounts
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