Additional
Consolidation
Reporting
Issues
10
Electronic Presentation byDouglas Cloud
Pepperdine University
• Prepared after Consolidated I/S, R/E and B/S.
• Steps:
– Adjustment of consolidated NI (depreciation and
amortization resulting from write-off of
differentials)
– Eliminating transfers between affiliates: sale or
purchase of assets, unrealized profit of
intercompany sales
– Non-controlling interest: income is deducted;
receipts and payments
Consolidated Statement of Cash Flows
PT Induk and Subsidiary
Consolidated Income Statement
For the Year Ended December 31, 20X2
Consolidated Income Statement, 20X2
Consolidated Income Statement, 20X2
Sales
Rp720,000,000
Gain on Sale of Land
30,000,000
Rp750,000,000
Less: Cost of Goods Sold
Rp340,000,000
Depreciation Expense
76,800,000
Other Expenses
105,000,000
-521800,000
Income Available to All Shareholders
Rp228,200,000
Income to Noncontrolling Interest
-15,000,000
PT Induk and Subsidiary
Consolidated Statement of Cash Flows For the Year Ended December 31, 20X2
Cash Flows from Operating Activities:
Consolidated Net Income
Rp213,200,000
Noncash Expenses, Revenues, Losses,
and Gains included in Income:
Depreciation Expense
76,800,000
Income to Noncontrolling
Interest
15,000,000
Gain on Sale of Land
-30,000,000
Increase in Accounts Receivable
-105,000,000
Increase in Inventory
-95,000,000
Increase in Accounts Payable
30,000,000
Net Cash Provided by Operating
Activities
Rpl05,000,000
Top
Consolidated Cash Flows Statement, 20X2
Consolidated Cash Flows Statement, 20X2
Consolidated Cash Flows Statement, 20X2
PT Induk and Subsidiary
Consolidated Statement of Cash Flows For the Year Ended December 31, 20X2
Cash Flows from Investing Activities:
Acquisition of Equipment
-Rp100,000,000
Sale of Land
70,000,000
Net Cash Used in Investing Activities
-Rp 30,000,000
Cash Flows from Financing Activities:
Dividends Paid:
To Parent Company Shareholders -Rp 60,000,000
To Noncontrolling Shareholders
-8,000,000
Net Cash Used in Financing Activities
-68,000,000
Net Increase in Cash
Rp 7,000,000
Bottom portion
Include in the consolidated income statement the
revenue and expenses of the subsidiary as if it had
been acquired at the beginning of the fiscal period,
and deduct the parent’s share of the subsidiary’s
preacquisition earnings at the bottom of the
consolidated income statement.
Include in the consolidated income statement only
the subsidiary’s revenue earned and expenses
incurred subsequent to the date of combination.
Include in the consolidated income statement the
revenue and expenses of the subsidiary as if it had
been acquired at the beginning of the fiscal period,
and deduct the parent’s share of the subsidiary’s
preacquisition earnings at the bottom of the
consolidated income statement.
Include in the consolidated income statement only
the subsidiary’s revenue earned and expenses
incurred subsequent to the date of combination.
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
The results of operations for a subsidiary purchased
Consolidation Following an Interim
Consolidation Following an Interim
Acquisition
Acquisition
On July 1, 20X1, PT Induk purchases 80 percent of
the common stock of PT Anak for its underlying
book value of Rp246,400,000.
On July 1, 20X1, PT Induk purchases 80 percent of
the common stock of PT Anak for its underlying
book value of Rp246,400,000.
Book value of PT Anak on January 1, 20X1:
Common stock
Rp200,000,000
Retained earnings
100,000,000
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
The ownership situation on July 1, 20X1, is as follows:
P
S
7/1/X1 80%Cost of investment
Rp246,400,000
Book value (7/1/X1)
Common
PT Anak
Rp200,000,000
Retained
PT Anak
108,000,000
Rp308,000,000
PT Induk’s share
x .80 -246,400,000
Differential
Rp -0-
Parent Company Entries
Parent Company Entries
On July 1, 20X1, PT Induk records the
purchase of PT Anak’ stock.
On July 1, 20X1, PT Induk records the
purchase of PT Anak’ stock.
July 1, 20X1
(1) Investment in PT Anak Stock
246,400,000
Cash
246,400,000
Record purchase of PT Anak
stock.
During the second half of 20X1, PT Induk
records its share of PT Anak’ income.
During the second half of 20X1, PT Induk
records its share of PT Anak’ income.
(3) Investment in PT Anak Stock 24,000,000
Income from Subsidiary
24,000,000
Record equity-method income.
Parent Company Entries
Parent Company Entries
PT Induk records dividends received from PT
Anak during the second half of 20X1.
PT Induk records dividends received from PT
Anak during the second half of 20X1.
(2) Cash
14,400,000
Investment in PT Anak Stock
14,400,000
Record dividends from PT Anak.
Rp18,000,000
Rp18,000,000
x .80
x .80
Rp18,000,000
Rp18,000,000
x .80
PT Induk PT Anak Eliminations
Item Debits Credits Consolidated
An entry is needed to eliminate
income from the subsidiary.
An entry is needed to eliminate
income from the subsidiary.
20X1
20X1
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
Income from
Subsidiary 24,000
Dividends
Declared (60,000 (30,000)
Investment in PT Anak
Income from
Subsidiary 24,000 (4) 24,000
Dividends
Declared (60,000 (30,000) (4) 14,400
Investment in PT Anak
Stock 256,000 (4) 9,600
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
20X1
20X1
)
PT Induk PT Anak Eliminations
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
Income to
Noncontrolling Interest
Dividends
Declared (60,000) (30,000) (4) 14,400
Noncontrolling Interest
An entry is required to assign income
to noncontrolling interest.
An entry is required to assign income
to noncontrolling interest.
20X1
20X1
PT Induk PT Anak Eliminations
Income to
Noncontrolling
Interest (5) 10,000 (10,000)
Dividends
Declared (60,000) (30,000) (4) 14,400 (5) 6,000
Noncontrolling
Interest (5) 4,000
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
20X1
20X1
PT Induk PT Anak Eliminations
Preacquisition Subsidiary Inc. Retained
Earnings, Jan. 1 300,000 100,000
Dividend Decl. (60,000 (30,000 (4) 14,400 (5) 6,000
Investment in
PT Anak 256,000 (4) 9,600
Common Stock 500,000 200,000 Noncontrolling
Interest (11) 4,000
20X1
20X1
An entry is necessary to eliminate the
An entry is necessary to eliminate the
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
) )
PT Induk PT Anak Eliminations
Consolidation Following an Interim Purchase
Consolidation Following an Interim Purchase
20X1
20X1
Preacquisition
Subsidiary Inc. (6) 16,000 (16,000
Retained
Earnings, Jan. 1 300,000 100,000 (6)100,000 300,000
Dividend Decl. (60,000 (30,000 (4) 14,400 (5) 6,000
(6) 9,600 (60,000
Investment in
PT Anak 256,000 (4) 9,600 (6)246,400
Common Stock 500,000 200,000 (6)200,000 500,000
PT Induk and Subsidiary
Consolidated Income Statement
For the Year Ended December 31, 20X1
Consolidated Income Statement, 20X1
Consolidated Income Statement, 20X1
Sales
Rp600,000,000
Cost of Goods Sold
-285,000,000
Gross Margin
Rp315,000,000
Expenses:
Depreciation and Amortization
Rp70,000,000
Other Expenses
55,000,000
Total Expenses
-125,000,000
Rp190,000,000
Preacquisition Subsidiary Income
-16,000,000
Income to Noncontrolling Interest
-10,000,000
Consolidated Earnings per Share
Consolidated Earnings per Share
Consol-
Weighted average of parent company shares outstanding
+
Shares of parent to be issued if dilutive
