1 / 9

Session 2—100% Owned Subsidiary Formation

Session 2—100% Owned Subsidiary Formation. Codification Topics Combination Processes Acquisition Method Related Formation and Acquisition Costs Parent Company Investment Analysis Formation and Consolidation of 100% Owned Subsidiary. Codification Topics. Topic 805: Business Combinations

inga
Download Presentation

Session 2—100% Owned Subsidiary Formation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Session 2—100% Owned Subsidiary Formation • Codification Topics • Combination Processes • Acquisition Method • Related Formation and Acquisition Costs • Parent Company Investment Analysis • Formation and Consolidation of 100% Owned Subsidiary Advanced Accounting-2010

  2. Codification Topics • Topic 805: Business Combinations • Topic 810: Consolidation Advanced Accounting-2010

  3. Motives for Combination • See list on page 39 • Notable combinations: • Bank of America and Merrill Lynch • InBev and Anheuser-Busch • Pfizer and Wyeth Advanced Accounting-2010

  4. Combination Processes • Creation of a single economic entity • Even if the subsidiary remains as a separate economic unit • Combinations we will cover • Formation – 100% • Formation – Less than 100% • Post Formation • Acquisition – 100% • Acquisition – Less than 100% • Post Acquisition Advanced Accounting-2010

  5. Acquisition Method • Applies to both formation and acquisition • Elements • Consideration transferred • Identified assets and liabilities (stockholders’ equity) • Identified non-controlling interests (NCI) • Goodwill or gain Advanced Accounting-2010

  6. Related Formation and Acquisition Costs • Professional service fees – expense • Other indirect expenditures – expense • Securities registration costs – deduct from P Co. APIC Advanced Accounting-2010

  7. Parent Company Investment Analysis • The standard consolidation equation: PC InvestmentCapitalOther Accounts BV + Excess = CS + APIC + RE + X + X + X … X Advanced Accounting-2010

  8. Formation and Consolidation Parent Co. • Investment XXX Cash XXX • Cash XXX Capital stock XXX APIC XXX Sub. Co. Advanced Accounting-2010

  9. Parma (P-Co) and Saraceno (S-Co) Case On December 31, 2010, the Parma Company, a Santa Barbara real estate development company, formed a 100% owned subsidiary, Saraceno Land and Recreation, by making a $600,000 investment. Saraceno issued 100,000 shares of $2 par value common stock to Parma. Saraceno’s only other transaction on December 31, 2010 was the purchase of land valued at $500,000. Required: a. Prepare P-Co’s analysis of this investment b. Record the investment on P-Co’s and S-Co’s books. b. Prepare the consolidation worksheet and consolidation entries at December 31, 2010. Advanced Accounting-2010

More Related