The stated purpose of the consolidated financial statements remains unchanged, "mainly for the benefit of the parent company shareholders and creditors, the operating performance and financial status of the parent company and all its subsidiaries, and is a single economic entity."
The general merger policy also remains unchanged from ARB 51 (revised by SFAS 94). Consolidated financial statements are usually more meaningful than independent statements, so it is necessary when a company has controlling financial interests in other companies. The ownership of major interest interests is a common condition for controlling financial interests. Therefore, when a company owns more than 50% of the voting shares of another company, it usually shows a merger. As previously required by SFAS No. 94, all major subsidiaries must be merged. However, if the majority owner cannot exercise control, the subsidiary will not be merged. (Please note that although control can be obtained by means other than ownership, the ED focuses on control through majority ownership.)
Most of the merger procedures are still performed in accordance with ARB 51. However, the ED includes some important changes and clarifications:
a. When gaining control of a subsidiary during an accounting period, only the income, expenses, gains and losses of the subsidiary after obtaining control shall be included in the consolidated financial statements (elimination of other options allowed by ARB 51).
b. Any parent company's shares held by a subsidiary must be offset during the merger.
c. All intercompany profits or losses must be eliminated regardless of the existence of non-controlling interests and must be distributed between controlled and non-controlling interest (if any) (except ARB 51's permitted distribution). .
d. The Education Department clarified that the consolidated financial statements must be used as general-purpose financial statements of companies that own one or more subsidiaries and that only the parent company's financial statements cannot be used as a valid substitute.
The ARB 51 allows non-controlling interests in the subsidiary's assets to be reported as liabilities, equity or two categories (actually common) in the consolidated financial statements. The ED requires non-controlling interests to report equity separately from the shareholders of the parent company and is fair. The possible title of the proposal is "non-controlling interest in subsidiaries."
Each part of the net gain or loss and other comprehensive income must be attributed to control and non-controlling interests based on its relative owner's equity. If the contractual arrangements specify other attribution arrangements, these elements of comprehensive income will be attributed to this in this manner.
If a controlling subsidiary's controlling interest and non-controlling interest's loss exceeds its interest in the subsidiary, even if the loss-making non-controlling interest exceeds the equity in the equity, the additional loss will be Continue to be vested in these non-controlling interests.
Once the parent company has obtained control over the subsidiary, the change in the owner's equity of the subsidiary that does not affect the control will be accounted for as an equity transaction and therefore no gain or loss will be recognized in the consolidated income statement. When there is a change in ownership, the book value of non-controlling interest is adjusted to reflect its new ownership level, and the difference between the adjustment and the fair value of the paid or received consideration is recognized in equity. This change has no effect on the net income or the numerator at the time of calculating the comprehensive income per share.
If the relative owners' equity of the controlling and non-controlling interests of the subsidiaries whose goodwill has been confirmed at the acquisition date is changed, the goodwill must be re-attributed to the controlling rights and non-controlling interests according to the relative commitments previously assigned to them. The amount of goodwill. According to SFAS No. 141R, the distribution of goodwill in the original purchase may not necessarily be the proportion of ownership allocated at the time of purchase.
If the subsidiary is controlled by any means (eg sales, contractual agreements), the gain or loss in the combined net proceeds will be recognized as the difference between the following two items (paragraph 27):
a. (1) The fair value of the fair value (if any) of the income and the fair value of the claimed transaction and (2) The sum of the fair value loss of any retained investment of the subsidiary before the date of the control
The parent company of the company on the day of control Loss of equity in net assets of an atomic company
If a subsidiary is partially owned when the parent company loses control, the net assets of the non-controlling equity subsidiary will be recognized from the carrying amount of the non-controlling interest. For non-controlling interests, no gain or loss is recognized.
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Orignal From: Consolidated Financial Statements and Non-controlling Interests
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