consolidated financial statements—date of acquisition advanced accounting, fifth edition 77

Consolidated Financial Consolidated Financial Statements—Date of AcquisitionStatements—Date of Acquisition

Advanced Accounting, Fifth Edition

7777

1. Understand the concept of control as used in reference to consolidations.

2. Explain the role of a non-controlling interest in business combinations.

3. Describe the reasons why a company acquires a subsidiary rather than its net assets.

4. Describe the valuation and classification of accounts in consolidated financial statements.

5. List the requirements for inclusion of a subsidiary in consolidated financial statements.

6. Discuss the limitations of consolidated financial statements.======================================================================

===============

7. Record the investment in the subsidiary on the parent’s books at the date of acquisition.

8. Prepare the consolidated work papers and eliminating entries at the date of acquisition.

9. Compute and allocate the difference (CAD) between implied value and book value of the acquired firm’s equity.

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10. Discuss some of the similarities and differences between U.S. GAAP and IFRS with respect to the preparation of consolidated financial statements at the date of acquisition.

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

Chapter Focus - Accounting for Stock Acquisitions

When one company controls another company through direct or indirect ownership of its voting stock.

Stock AcquisitionStock AcquisitionStock AcquisitionStock Acquisition

Acquiring company referred to as the parent.

Acquired company referred to as the subsidiary.

Other shareholders considered non-controlling interest.

Parent records interest in subsidiary as an investment.

If a subsidiary owns a controlling interest in one or more other companies, a chain of ownership is forged by which the parent company controls other companies.LO 2 Noncontrolling interest (NCI).LO 2 Noncontrolling interest (NCI).

The Securities and Exchange Commission

defines a subsidiary as an affiliate controlled by

another entity, directly or indirectly, through one or

more intermediaries.

Control means the possession, direct or indirect,

of the power to direct management and

policies of another entity, whether through the

ownership of voting shares, by contract, or

otherwise.

Definitions of Subsidiary and ControlDefinitions of Subsidiary and ControlDefinitions of Subsidiary and ControlDefinitions of Subsidiary and Control

LO 1 Meaning of control.LO 1 Meaning of control.

Control using U.S. GAAP:

the direct or indirect ability to

determine the direction of management

and policies through ownership, contract, or

otherwise

FASB ASC paragraph 810-10-15-8 states:

the usual condition for a controlling

financial interest is ownership of a majority

voting interest



However, application of the majority voting interest

requirement may not identify the party with a

controlling financial interest because the

controlling financial interest may be achieved

through arrangements that do not involve

voting interests.

The first step in determining whether the financial

statements should be consolidated is to

determine if the reporting entity has a

variable interest in another entity, referred

to as a potential variable interest entity

(VIE).



Definitions of ControlDefinitions of ControlDefinitions of ControlDefinitions of Control


Requirements for the Inclusion of Requirements for the Inclusion of Subsidiaries in the Consolidated Subsidiaries in the Consolidated Financial StatementsFinancial Statements

Requirements for the Inclusion of Requirements for the Inclusion of Subsidiaries in the Consolidated Subsidiaries in the Consolidated Financial StatementsFinancial Statements

LO 5 Requirements regarding consolidation of subsidiaries.LO 5 Requirements regarding consolidation of subsidiaries.

Purpose of consolidated statements - to present

the operating results and the financial position of

a parent and all its subsidiaries as if they are one

economic entity.

Circumstances when majority-owned subsidiaries should

be excluded from the consolidated statements:

1. Control does not rest with the majority owner.

2. Subsidiary operates under governmentally imposed

uncertainty so severe as to raise significant doubt about

the parent’s control.

Advantages to acquiring a controlling

interest in another company.

Reasons For Subsidiary CompaniesReasons For Subsidiary CompaniesReasons For Subsidiary CompaniesReasons For Subsidiary Companies

1. Stock acquisition is relatively simple.

2. Control of subsidiary can be accomplished with a smaller investment.

3. Separate legal existence of affiliates provides an element of protection of the parent’s assets.

LO 3 Acquiring assets or stock.LO 3 Acquiring assets or stock.

Statements prepared for a parent company and its subsidiaries are called consolidated financial statements.

Consolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial StatementsConsolidated Financial Statements

Ignore legal aspects of separate entities, focus on economic entity under “control” of management.

Substance rather than form.

Not substitute for statements prepared by separate subsidiaries, which may be used by:

Creditors

Non-controlling stockholders

Regulatory agenciesLO 4 Valuation and classification of subsidiary assets and LO 4 Valuation and classification of subsidiary assets and

liabilities.liabilities.

Investments at the Date of AcquisitionInvestments at the Date of AcquisitionInvestments at the Date of AcquisitionInvestments at the Date of Acquisition

LO 7 Recording of investment at acquisition.LO 7 Recording of investment at acquisition.

Recording Investments at Cost (Parent’s Books)

Stock investment is recorded at cost as measured

by fair value of the consideration given or

consideration received, whichever is more clearly

evident.

Consideration given may include cash, other assets,

debt securities, stock of the acquiring company.

Assets and liabilities are summed, regardless of whether the parent owns 100% or a smaller controlling interest.

Consolidated Balance SheetsConsolidated Balance SheetsConsolidated Balance SheetsConsolidated Balance Sheets

Non-controlling interests (NCI) are reflected

as a component of owners’ equity.

Eliminations must be made to cancel the effects

of transactions among the parent and its

subsidiaries.

A work-paper is frequently used to summarize the

effects of various additions and eliminations.

LO 8 Preparing consolidated statements using a workpaper.LO 8 Preparing consolidated statements using a workpaper.

Investment Elimination

It is necessary to eliminate the investment

account of the parent company against the

related stockholders’ equity of the subsidiary

to avoid double counting of these net assets.

When parent’s share of subsidiary’s equity is

eliminated against the investment account,

subsidiary’s net assets are substituted for the

investment account in the consolidated balance

sheet.


LO 8 Investment is eliminated for consolidated statements.LO 8 Investment is eliminated for consolidated statements.


LO 8 Preparing consolidated statements using a workpaper.LO 8 Preparing consolidated statements using a workpaper.

Intercompany receivable (payable) Intercompany payable (receivable)Against

Advances to subsidiary (from subsidiary)

Advances from parent (to parent)Against

Interest revenue (interest expense) Interest expense (interest revenue)Against

Dividend revenue (dividends declared) Dividends declared (dividend revenue)Against

Management fee received from subsidiary

Management fee paid to parentAgainst

Sales to subsidiary (purchases of inventory from subsidiary)

Purchases of inventory from parent (sales to parent)Against

Parent’s Accounts Subsidiary’s Accounts

Investment in subsidiary Equity accountsAgainst

Intercompany Accounts to Be Eliminated



“Computation and Allocation of Difference (CAD)” between Implied Value and Book Value

Step 1: Determine percentage of stock acquired.

Step 2: Divide purchase price by the percentage

acquired

to calculate the implied value of the

subsidiary.

Step 3: Difference between step 2 and book value

of

subsidiary’s equity must be allocated to adjust

the

underlying assets and liabilities of the

acquired

company.

E3-2: On January 1, 2011, Polo Company purchased 100% of the common stock of Save Company by issuing 40,000 shares of its (Polo’s) $10 par value common stock with a market price of $17.50 per share. Polo incurred cash expenses of $20,000 for registering and issuing the common stock. The stockholders’ equity section of the two company’s balance sheets on December 31, 2010, were:

Common stock, $10 par value $350,000 $320,000

Other contributed capital 590,000 175,000

Retained earnings 380,000 205,000

Polo Save


Prepare: -Part A: Acquisition Entry-Part B: Elimination Entry

E3-2: Part A: Acquisition Entry

Investment in Save (40,000 x $17.50) 700,000

Common Stock 400,000 Other Contributed Capital 300,000

Other Contributed Capital 20,000Cash

20,000


Part B: Elimination Entry:Common Stock – Save 320,000 Other Contributed Capital – Save 175,000 Retained Earnings –Save 205,000

Investment in Save 700,000

Exercise 3-1: Work paper Elimination Entries: 3 Cases

Prepare in general journal form the work-paper entries to eliminate Prancer Company’s investment in Saltez Company in the preparation of a consolidated balance sheet at the date of acquisition for each of the following independent cases:

Saltez Company Equity Balances Percent of Investment Common Other Contributed Retained Stock Owned Cost Stock Capital Earningsa. 100% $351,000 $160,000 $92,000

$43,000b. 90 232,000 190,000 75,000 (29,000)c. 80 159,000 180,000 40,000

(4,000)Any difference between book value of net assets and the value implied by the purchase price relates to subsidiary property plant and equipment except for case (c).

In case (c) assume that all book values and fair values are the same.

What is the IMPLIED VALUE of "S“ in Cases a, b, and c?

Exercise 3-1 a. Common Stock – Saltez 160,000

Other Contributed Capital - Saltez 92,000 Retained Earnings - Saltez 43,000 Property, Plant, and Equipment 56,000

Investment in Saltez 351,000

b. Common Stock – Saltez 190,000 Other Contributed Capital – Saltez 75,000 Retained Earnings – Saltez 29,000

Property, Plant, and Equipment 21,778* Investment in Saltez 232,000

Non-controlling Interest 25,778**

*$232,000/0.9 = $257,778; $257,778 -[$190,000+$75,000-$29,000]) **($232,000/0.9 = $257,778 – 232,000 = 25,778

Exercise 3-1 (C)

This is a bargain acquisition because the investment cost of $159,000 (=80%)

implies a total value of $198,750 <= ($159,000 / 0.8);

Since this value of $198,750 is less than the book value of equity $216,000 = $180,000 +$40,000 - $4,000, the difference is a bargain of $17,250. This bargain is allocated between the parent (this portion is reflected as a gain)

and the NCI. c. Common Stock – Saltez 180,000

Other Contributed Capital – Saltez 40,000 Retained Earnings – Saltez 4,000 Investment in Saltez 159,000 Gain on Purchase of Business – Prancer ** 13,800

Non-controlling Interest (.2) ($198,750) + $3,450* 43,200 ** The ordinary gain to Prancer is = $159,000 – (.80)($216,000) = $13,800

* Non-controlling interest reflects the non-controlling share of implied value => (.20 x $198,750 = $39,750) plus the NCI portion of the bargain (.20 x $17,250= 3,450)


It is necessary to eliminate the investment

account of the parent company against the

related stockholders’ equity of the subsidiary to

avoid double counting of these net assets.

When parent’s share of subsidiary’s equity is

eliminated against the investment account,

subsidiary’s net assets are substituted for the

investment account in the consolidated balance

sheet.

Consolidated Balance Sheets: Use of Consolidated Balance Sheets: Use of WorkpapersWorkpapersConsolidated Balance Sheets: Use of Consolidated Balance Sheets: Use of WorkpapersWorkpapers

LO 8 Investment is eliminated for consolidated statements.LO 8 Investment is eliminated for consolidated statements.



LO 9 Computing and allocating the LO 9 Computing and allocating the difference between implied and difference between implied and book value (CAD).book value (CAD).

“Computation and Allocation of Difference (CAD)” between Implied Value and Book Value”

Step 1: Determine percentage of stock acquired.

Step 2: Divide purchase price by the percentage

acquired

to calculate the implied value of the

subsidiary.

Step 3: Difference between step 2 and book value

of

subsidiary’s equity must be allocated to adjust

the underlying assets and liabilities of the acquired

company.



The prior steps lead to the following possible cases:

Case 1. The implied value (IV) of the subsidiary is equal to the book value of the subsidiary’s equity (IV = BV), and

a. The parent company acquires 100% of the subsidiary’s stock; or

b. The parent company acquires less than 100% of the subsidiary’s stock.

Case 2. The implied value of the subsidiary exceeds the book value of the subsidiary’s equity (IV > BV), and



Case 3. The implied value of the subsidiary is less than the book value of the subsidiary’s equity (IV < BV), and



Case 1(a): Implied Value of Subsidiary Is Equal to Book Value of Subsidiary Company’s Equity (IV = BV) and 100% of Stock Acquired.


Illustration: Assume that on January 1, 2013, P Company acquired all the outstanding stock (10,000 shares) of S Company for cash of $160,000.

What journal entry would P Company make to record the shares of S Company acquired?

Investment in S Company $160,000

Cash $160,000

Balance Sheet P Company S CompanyCash 40,000$ 40,000$ Other current assets 280,000 100,000 Plant and equipment 240,000 80,000 Land 80,000 40,000 Investment in Sill 160,000

Total assets 800,000$ 260,000$

Liabilities 120,000$ 100,000$ Common stock 400,000 100,000 Other Contributed capital 80,000 20,000 Retained earnings 200,000 40,000

Total Liab. and Equity 800,000$ 260,000$

Case 1(a): The balance sheets of both companies immediately after the acquisition of shares is as follows:



Price paid $160,000

% acquired 100%

Implied value 160,000

Book value 160,000

Difference $0

Implied value = Book value

Case 1(a): The workpaper to consolidate the balance sheets for P and S on Jan. 1, 2013, date of acquisition, is presented below:



ConsolidatedBalance Sheet P Company S Company Debit Credit BalancesCash 40,000$ 40,000$ 80,000$ Other current assets 280,000 100,000 380,000 Plant and equipment 240,000 80,000 320,000 Land 80,000 40,000 120,000 Investment in Sill 160,000 160,000

Total assets 800,000$ 260,000$ 1,060,000$

Liabilities 120,000$ 100,000$ 220,000$ Common stock 400,000 100,000 500,000 Other Contributed capital 80,000 20,000 100,000 Retained earnings 200,000 40,000 240,000

Total Liab. and Equity 800,000$ 260,000$ 1,060,000$

Eliminations

Adjusting and eliminating entries are made on the workpaper for the preparation of consolidated statements.

Case 1(a): The workpaper entry to eliminate S Company’s stockholders’ equity against the investment account is:



Common stock (S) 100,000

Other contributed capital (S) 20,000

Retained earnings (S) 40,000

Investment in S Company 160,000

This is a workpaper-only entry.


ConsolidatedBalance Sheet P Company S Company Debit Credit BalancesCash 40,000$ 40,000$ 80,000$ Other current assets 280,000 100,000 380,000 Plant and equipment 240,000 80,000 320,000 Land 80,000 40,000 120,000 Investment in Sill 160,000 160,000 -

Total assets 800,000$ 260,000$ 900,000$

Liabilities 120,000$ 100,000$ 220,000$ Common stock 400,000 100,000 100,000 400,000 Other Contributed capital 80,000 20,000 20,000 80,000 Retained earnings 200,000 40,000 40,000 200,000

Total Liab. and Equity 800,000$ 260,000$ 160,000$ 160,000$ 900,000$

Eliminations

Case 1(a): The workpaper to consolidate the balance sheets for P and S on Jan. 1, 2013, date of acquisition, is presented below:

Case 1(a): Note the following on the workpaper.


1. The investment account and related subsidiary’s stockholders’ equity have been eliminated and the subsidiary’s net assets substituted for the investment account.

2. Consolidated assets and liabilities consist of the sum of the parent and subsidiary assets and liabilities in each classification.

3. Consolidated stockholders’ equity is the same as the parent company’s stockholders’ equity.

Case 1(b): Parent’s Cost of Investment Is Equal to Book Value of Subsidiary’s Stock Acquired (IV=BV) and Partial Ownership.



Illustration: Assume that on January 1, 2013, P Company acquired 90% (9,000 shares) of the stock of S Company for $144,000. What journal entry would P Company make to record the shares of S Company acquired?


Cash $144,000



Balance Sheet P Company S CompanyCash 56,000$ 40,000$ Other current assets 280,000 100,000 Plant and equipment 240,000 80,000 Land 80,000 40,000 Investment in Sill 144,000

Total assets 800,000$ 260,000$

Liabilities 120,000$ 100,000$ Common stock 400,000 100,000 Other Contributed capital 80,000 20,000 Retained earnings 200,000 40,000 Noncontrolling interest


Case 1(b): The balance sheets of both companies immediately after the acquisition of shares is as follows:

Price paid $144,000

% acquired 90%


Book value 160,000

Difference $0




90% 10%Parent Noncontrolling TotalShare Share Value

Purchase price and implied value 144,000$ 16,000$ 160,000$ Less: Book value of equity acquired:

Common stock 90,000 10,000 100,000 Other contributed capital 18,000 2,000 20,000 Retained earnings 36,000 4,000 40,000 Total book value 144,000$ 16,000$ 160,000$

Difference between implied and book value -$ -$ -$

Case 1(b): Computation and Allocation of Difference between Implied and Book Values:



ConsolidatedBalance Sheet P Company S Company Debit Credit BalancesCash 56,000$ 40,000$ 96,000$ Other current assets 280,000 100,000 380,000 Plant and equipment 240,000 80,000 320,000 Land 80,000 40,000 120,000 Investment in Sill 144,000 144,000

Total assets 800,000$ 260,000$ 1,060,000$

Liabilities 120,000$ 100,000$ 220,000$ Common stock 400,000 100,000 500,000 Other Contributed capital 80,000 20,000 100,000 Retained earnings 200,000 40,000 240,000 Noncontrolling interest -

Total Liab. and Equity 800,000$ 260,000$ 1,060,000$

Eliminations

Case 1(b): The workpaper to consolidate the balance sheets for P and S on Jan. 1, 2013, date of acquisition, is presented below:

Solution on notes page

Case 1(b): The workpaper entry to eliminate S Company’s stockholders’ equity against the investment account is:






Investment in S Company 144,000Non-controlling interest in equity 16,000

(establish the NCI)



ConsolidatedBalance Sheet P Company S Company Debit Credit BalancesCash 56,000$ 40,000$ 96,000$ Other current assets 280,000 100,000 380,000 Plant and equipment 240,000 80,000 320,000 Land 80,000 40,000 120,000 Investment in Sill 144,000 144,000 -

Total assets 800,000$ 260,000$ 916,000$

Liabilities 120,000$ 100,000$ 220,000$ Common stock 400,000 100,000 100,000 400,000 Other Contributed capital 80,000 20,000 20,000 80,000 Retained earnings 200,000 40,000 40,000 200,000 Noncontrolling interest 16,000 16,000


Eliminations


Case 2(b): Implied Value Exceeds Book Value of Subsidiary Company’s Equity (IV>BV)—Partial Ownership.





Cash $148,000



Balance Sheet P Company S CompanyCash 52,000$ 40,000$ Other current assets 280,000 100,000 Plant and equipment 240,000 80,000 Land 80,000 40,000 Investment in Sill 148,000 Difference (IV>BV)

Total assets 800,000$ 260,000$




Price paid $148,000

% acquired 80%


Book value 160,000

Difference $25,000







Difference between implied and book value 20,000$ 5,000$ 25,000$ Land revaluation (mark to market) (20,000) (5,000) (25,000) Balance -$ -$ -$


We assume the entire difference is attributable to land with a current value higher than historical

cost.

Case 2(b): The workpaper (elimination) entries are as follows:






Difference between IV and BV 25,000

Investment in S Company 148,000Noncontrolling interest in equity 37,000

#1

Land 25,000


#2



ConsolidatedBalance Sheet P Company S Company Debit Credit BalancesCash 52,000$ 40,000$ 92,000$ Other current assets 280,000 100,000 380,000 Plant and equipment 240,000 80,000 320,000 Land 80,000 40,000 25,000 145,000 Investment in Sill 148,000 148,000 - Difference (IV>BV) 25,000 25,000 -

Total assets 800,000$ 260,000$ 937,000$



Eliminations


Case 2(b): Reasons an Acquiring Company May Pay More Than Book Value.



1. Fair value of specific tangible or intangible assets of the subsidiary may exceed its recorded value because of appreciation.

2. Excess payment may indicate existence of goodwill.

3. Liabilities, generally long-term, may be overvalued.

4. A variety of market factors may affect the price paid.

Case 3(b): Implied Value of Subsidiary is Less Than Book Value (IV<BV)—Partial Ownership.





Cash $120,000



Balance Sheet P Company S CompanyCash 80,000$ 40,000$ Other current assets 280,000 100,000 Plant and equipment 240,000 80,000 Land 80,000 40,000 Investment in Sill 120,000 Difference (IV<BV)

Total assets 800,000$ 260,000$




Price paid $120,000

% acquired 80%


Book value 160,000

Difference $10,000







Difference between implied and book value (8,000)$ (2,000)$ (10,000)$ Plant & equipment (mark to market) 8,000 2,000 10,000 Balance -$ -$ -$


Assume the difference is attributable to plant and equipment, in this case an overvaluation of

$10,000.

Case 3(b): The workpaper (elimination) entries are as follows:






Difference between IV and BV 10,000Investment in S Company

120,000Noncontrolling interest in equity 30,000

#1


Plant and equipment 10,000

#2



ConsolidatedBalance Sheet P Company S Company Debit Credit BalancesCash 80,000$ 40,000$ 120,000$ Other current assets 280,000 100,000 380,000 Plant and equipment 240,000 80,000 320,000 Land 80,000 40,000 10,000 110,000 Investment in Sill 120,000 120,000 - Difference (IV>BV) 10,000 10,000 -

Total assets 800,000$ 260,000$ 930,000$



Eliminations


The noncontrolling interest in the subsidiary is reported as:

a. Asset

b. Liability

c. Equity

d. Expense

Review QuestionReview Question



Subsidiary Treasury Stock Holdings



A subsidiary may hold some of its own shares as

treasury stock at the time the parent company

acquires its interest.

Because the treasury stock account represents a

contra stockholders’ equity account, it must be

eliminated by a credit when the investment

account and subsidiary company’s equity

accounts are eliminated on the workpaper.

Other Intercompany Balance Sheet Eliminations



Intercompany accounts receivable, notes

receivable, and interest receivable, for example,

must be eliminated against the reciprocal

accounts payable, notes payable, and interest

payable.

The full amount of all intercompany receivables

and payables is eliminated without regard to the

percentage of control held by the parent company.

Adjusting Entries Prior to Eliminating Entries



At times, workpaper adjustments to accounting

data may be needed before appropriate

eliminating entries can be accomplished.

Make on workpaper in eliminations columns

or

Adjust the subsidiary’s statements prior to

their entry on the workpaper.

Which of the following adjustments do notnot occur in the consolidating process?

a. Elimination of parent’s retained earnings

b. Elimination of intra-company balances

c. Allocations of difference between implied and book values

d. Elimination of the investment account

Review QuestionReview Question



For Example:

Little information of value in consolidated

statements because they contain insufficient

detail about the individual subsidiaries.

Highly diversified companies operating across

several industries, often the result of mergers

and acquisitions, are difficult to analyze or

compare.

LO 6 Limitations of consolidated statements.LO 6 Limitations of consolidated statements.

Limitations of Consolidated Limitations of Consolidated StatementsStatementsLimitations of Consolidated Limitations of Consolidated StatementsStatements

IFRS Versus U.S. GAAPIFRS Versus U.S. GAAPIFRS Versus U.S. GAAPIFRS Versus U.S. GAAP

LO 10 Similarities and differences between U.S. GAAP and IFRS. LO 10 Similarities and differences between U.S. GAAP and IFRS.

Deferred Taxes on the Date of Deferred Taxes on the Date of AcquisitionAcquisitionDeferred Taxes on the Date of Deferred Taxes on the Date of AcquisitionAcquisition

APPENDIX A

If a purchase acquisition is tax-free to the seller

Tax bases of the acquired assets and liabilities are carried forward at historical book values.

Assets and liabilities of the acquired company are recorded on the consolidated books at adjusted fair value.

Under current guidelines, the tax effects of the difference between consolidated book values and the tax bases must be recorded as deferred tax liabilities or assets.


Illustration: Suppose that Purchasing Company acquires

90% of Selling Company by issuing stock valued at

$800,000. The only difference between book value and fair

value relates to depreciable plant and equipment. Plant

and equipment has a market value of $400,000 and a book

value of $250,000. All other book values approximate

market values. Assume that the combination qualifies as a

nontaxable exchange. On the date of acquisition, Selling

Company’s book value of equity is $600,000, which

includes $150,000 of common stock and $450,000 of

retained earnings. Assume a 30% tax rate. Consider the

following Computation and Allocation Schedule with and

without considering deferred taxes.

The workpaper entry to eliminate the investment account is as follows:


Entries for allocation with and without deferred taxes.

FASB has issued guidance for the consolidation of special-purpose entities (SPEs) through Interpretation No. 46(R) “Consolidation of Variable Interest Entities” and SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)[ASC 810–10–30].”

An enterprise shall consolidate a variable interest entity (VIE) when that enterprise has a variable interest (or combination of variable interests) that provides the enterprise with a controlling financial interest on the basis of the certain provisions (listed below).

FASB Statement No. 167 requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity.

Consolidation of Variable Interest Consolidation of Variable Interest EntitiesEntitiesConsolidation of Variable Interest Consolidation of Variable Interest EntitiesEntities

APPENDIX B

Copyright © 2012 John Wiley & Sons, Inc. All rights

reserved. Reproduction or translation of this work beyond

that permitted in Section 117 of the 1976 United States

Copyright Act without the express written permission of

the copyright owner is unlawful. Request for further

information should be addressed to the Permissions

Department, John Wiley & Sons, Inc. The purchaser may

make back-up copies for his/her own use only and not for

distribution or resale. The Publisher assumes no

responsibility for errors, omissions, or damages, caused by

the use of these programs or from the use of the

information contained herein.

CopyrightCopyrightCopyrightCopyright

consolidated financial statements—date of acquisition advanced accounting, fifth edition 77

Documents

parent company

voting stock

indirect ownership

concept of control

ownership of voting

definitions of controllo

consolidated work papers

direct management