An Introduction to Consolidated Financial Statements Pertemuan 17-18

2. An Introduction to Consolidated Financial Statements Pertemuan 17-18 Matakuliah : Akuntansi Keuangan Lanjutan I Tahun : 2010

3. Consolidated Income Statements • Intercompany transactions are eliminated to prevent double counting of revenues and expenses. • (Similar to eliminations for preparing a consolidated balance sheet) Prepared by combining revenues and expenses of the parent and subsidiary companies Bina Nusantara University 3

4. What kinds of intercompany transactions affect the consolidated income statement? • Sales and purchases between parent and subsidiary • Income and expenses related to loans, receivables, or bond indebtedness between parent and subsidiary • Other income and expense from intercompany transactions Bina Nusantara University 4

5. Consolidated Income Statement WorksheetSample Bina Nusantara University 5

6. Consolidated Income Statements of Sand & Pilot Bina Nusantara University 6

7. Consolidated Income Statements – Cont’d

8. Consolidated Income Statements – Cont’d Bina Nusantara University 8

9. Key Income Statement Items • The Income from Subsidiary account is eliminated. • Current period amortizations are included in the appropriate expense accounts. • Noncontrolling interest share of net income is proportional to the Income from Subsidiary under the equity method. $571.50 x .10/.90 = $63.50 Bina Nusantara University 9

10. Push Down Accounting • SEC requirement • Subsidiary is substantially wholly-owned (approx. 90%) • No publicly held debt or preferred stock • Books of the subsidiary are adjusted • Assets, including goodwill, and liabilities revalued based on acquisition price • Retained earnings is replaced by Push-Down Capital which includes retained earnings and the valuation adjustments Bina Nusantara University 10