Consolidation Theories Student Version Summer I 2009

Consolidation Theories Student Version Summer I 2009 -...

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Accounting 401 Consolidation Theories 1. Parent Company Concept a. Consolidation is based on parent’s interest in the fair market value of subsidiary’s net assets on the date of the purchase combination. b. The parent’s long-term investment account is assumed to include a proportionate share of the fair market value of subsidiary’s net assets. c. Minority interest in subsidiary net assets is calculated using the book value of subsidiary’s net assets and is reported as a non-current liability on the consolidated balance sheet. d. Goodwill is calculated as the difference between the investment cost and proportionate share of subsidiary’s net identifiable assets at fair market value on the date of the purchase combination. e. Consolidated working paper entries include an adjustment to subsidiary’s net assets at book value of parent’s share of the difference between fair market value and book value. 2. Entity (Economic Unit Concept)/Full Goodwill Method a. Consolidation is based on the fair market value of subsidiary’s net assets on the date of the purchase combination. b.
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This note was uploaded on 03/08/2012 for the course ACCT 401 taught by Professor Staff during the Summer '08 term at Texas A&M.

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Consolidation Theories Student Version Summer I 2009 -...

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