consolidated accounting

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CONSOLIDATED ACCOUNTING Instructor: Khoi Huy Dang

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Page 1: Consolidated Accounting

CONSOLIDATED ACCOUNTINGInstructor: Khoi Huy Dang

Page 2: Consolidated Accounting

Contents

Introduction1

Group Accounting2

Methods3

Foreign Transaction4

Page 3: Consolidated Accounting

Introduction

Consolidated Statements

Elimination of Intercompany Transaction

Consolidation of Foreign Operations

Page 4: Consolidated Accounting

Inter-Transaction Exercise

KDGKDG

APLAPL

TYNTYN

LHHLHH

100%100% 100%100%

100%100%

100100

5050

7070

2020 7070

120120

1010

Page 5: Consolidated Accounting

Group Accounting

Why a group?

Ownership and Control

Scope of Consolidation

Methods of Consolidation Full consolidation Equity consolidation Joint-Venture

Page 6: Consolidated Accounting

Ownership and Control

Ownership

Control

Vietnam ownership & control

Page 7: Consolidated Accounting

Ownership …

Controlling Stakes: >50%

60% 20% 60%

5% 40% 33%

10% 10% 20%

Example 1 Example 2 Example 3

A A A

B B B

M M M

Page 8: Consolidated Accounting

And how it controls …

A A A

B B B

M M M

M on B 15% (10+5)M on B 15% (10+5) M on B 40%M on B 40% M on B 55%M on B 55%

control 100%control 100%

control 10%control 10%

control 5%control 5%

control 0%control 0%

control 10%control 10%

control 40%control 40%

control 100%control 100%

control 20%control 20%

control 33%control 33%

Controlling Stakes: >50%

60% 20% 60%

5% 40% 33%

10% 10% 20%

B

M M M

A A A

B B

Page 9: Consolidated Accounting

Scope of Consolidation (1)

Control

Influence

Not in scope

Page 10: Consolidated Accounting

Scope of Consolidation (2)

100% 80% (20% MI)

SUB 1 SUB 2

30%

50%10%S

CO

PE

of

CO

NS

OL

IDA

TIO

N

Co

ntr

ol

MOTHER Co

Infl

uen

ceASSOCIATE

JOINT-VENTURENot in Scope

INVESTMENT

Page 11: Consolidated Accounting

Methods

Full Consolidation

Equity Consolidation

Proportion Consolidation

Page 12: Consolidated Accounting

Methods

100% 80% (20% MI)

SUB 1 SUB 2

30%

50%10%

INVESTMENTNot in Scope

CO

NS

OL

IDA

TIO

N M

ET

HO

D

Fu

ll C

on

soli

dat

ion

MOTHER Co

Eq

uit

y C

on

soli

dat

ion

ASSOCIATE

JOINT-VENTURE

Pro

po

rti

on

al

Co

nso

lid

atio

n

Page 13: Consolidated Accounting

Full Consolidation (1)

M owns 90% of F

BS of M

Assets (M) Equity (M)

5,300 Liabilities (M)

9,100 Investment in F

900 4,700 10,000 10,000

BS of affiliate FAssets (F) Equity (F)

Capital 1,000RE 600

1,600Liabilities (F)

2,500 9002,500 2,500

Page 14: Consolidated Accounting

Full Consolidation (2)

M owns 90% of F

BS of M Consolidated Balance Sheet

Assets (M) Equity (M) Consolidated EquityM 5,300F 540

5,8405,300 Minority Interest

Liabilities (M) 160Liabilities (M)

9,100 9,100Investment in F Assets (F)

900 4,700 4,70010,000 10,000 Liabilities (F)

BS of affiliate F 2,500 900Assets (F) Equity (F) 11,600 11,600

Capital 1,000RE 600

1,600Liabilities (F)

2,500 9002,500 2,500

Assets (M) after droping Investment

in F

Page 15: Consolidated Accounting

Equity Consolidation (1)

M owns 90% of F

BS of M

Assets (M) Equity (M)

5,300 Liabilities (M)

9,100 Investment in F

900 4,700 10,000 10,000

BS of affiliate FAssets (F) Equity (F)

Capital 1,000RE 600

1,600Liabilities (F)

2,500 9002,500 2,500

Page 16: Consolidated Accounting

Equity Consolidation (2)

M owns 90% of F

BS of M Consolidated Balance Sheet

Assets (M) Equity (M) Consolidated EquityM 5,300F 540

5,300 Liabilities (M) 5,840

Liabilities (M)9,100 9,100

Investment in F900 4,700

10,000 10,000

BS of affiliate F 1,440 4,700Assets (F) Equity (F) 10,540 10,540

Capital 1,000RE 600

1,600Liabilities (F)

2,500 9002,500 2,500

Assets (M) after droping

Investment in F

Consolidated Investment

Page 17: Consolidated Accounting

Proportional Consolidation (1)

M owns 90% of F

BS of MRules: 100% mother + % * Child

Assets (M) Equity (M)

5,300 Liabilities (M)

9,100 Investment in F

900 4,700 10,000 10,000

BS of affiliate FAssets (F) Equity (F)

Capital 1,000RE 600

1,600Liabilities (F)

2,500 9002,500 2,500

Page 18: Consolidated Accounting

Proportional Consolidation (2)

M owns 90% of F

BS of M Consolidated Balance Sheet

Assets (M) Equity (M) Consolidated EquityM 5,300F 540

5,300 Liabilities (M) 5,840

Liabilities (M)9,100 9,100

Investment in F900 4,700

10,000 10,000

BS of affiliate F 2,250 5,510Assets (F) Equity (F) 11,350 11,350

Capital 1,000RE 600

1,600Liabilities (F)

2,500 9002,500 2,500

Assets (M) after droping Investment

in F

Consolidated Investment

Page 19: Consolidated Accounting

Exercises

S90% 25%

RE = 60000 B H RE = 30000Result = 16000 Result = 8000

S sold to B 16000 goods (profit/markup 1/3 included), 80% still in Inventory.

Income Statement and Balance Sheet of the company S, B and HIncome Statement and Balance Sheet of the company S, B and H

Page 20: Consolidated Accounting

Foreign Transaction

Translation Adjustment

Page 21: Consolidated Accounting

Khôi Huy Đặng