lecture_16_consolidated_accounts_and_insurance_company_accounts

Lecture_16_consolidated_accounts_and_insurance_company_accounts

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MA826 16- Consolidated Financial Statements & Insurance Company Accounts
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Consolidated accounts A group consists of a ‘holding company’ and its ‘subsidiaries’ The holding company holds the controlling interest in the subsidiaries. Holding Company H Owns 100% of shares in subsidiary S Owns <100% of shares in subsidiary S Wholly Owned Partially Owned
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Consolidated accounts The group should be viewed as a single economic entity. The holding company is required to publish a set of consolidated profit and loss account and balance sheet which reflect the true financial position of the company. Consolidation is a process of combining the various items in the profit and loss accounts and balance sheet of group members into a single group account. Example H Ltd acquires 10,000 shares in S Ltd on 31 Dec.1998 at par value (ie the price paid is exactly the book value on the balance sheet). The balance sheets of the two companies were as follows:
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Consolidated accounts 36 16 30 Total Eq + Liabs 16 6 10 Current liabilities 20 10 20 Share Cap (£1 shares) 36 16 30 Total assets 22 10 12 Current assets 10 Investment in S Ltd 14 6 8 Non Current assets H Consolidated S Ltd H Ltd £000
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Consolidated accounts The example is oversimplified on two counts 1) It is unlikely that any company would be bought and sold for exactly is balance sheet value. Any difference between purchase price and balance sheet value is called Goodwill. Goodwill appears as an intangible asset appears in the consolidated balance sheet Same example but say H Ltd paid £11000 for S Ltd
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Consolidated accounts H Ltd S Ltd H Consolidated Non Current assets inc goodwill 8 6 15
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This note was uploaded on 06/07/2011 for the course MA 826 taught by Professor Loba,millet during the Spring '11 term at Kent Uni..

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Lecture_16_consolidated_accounts_and_insurance_company_accounts

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