Why must the eliminating entries be entered in the consolidation worksheet each time consolidated statements are prepared?
The entries serve to clear transactions or partnership with subsidiary companies once the accounting or financial statements have been merged. Transactions are recorded in consolidation worksheet but do not change any balances in the holding company books of account. Bracci, Humphrey, Moll and Steccolini (2015) explained that the balances in the books are starting points in the consolidation process. The entries eliminated reconcile the worksheet of individual account balances of the consolidating companies .
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How is the beginning-of-period non-controlling interest balance determined?
The beginning of the period is determined by assets on the subsidiary’s books at the date of acquisition. NCI is the part that is not acquired by the holding company consisting of less than fifty percent from the part that is not controlled by the holding company.
How is the end-of-period non-controlling interest balance determined?
At the end of a period, the non-controlling interest is determined by calculating profit after tax in the consolidated financial statement multiplied by the percentage that is not controlled the parent company after making adjustments of depreciation if there were any. The NCI is finally recorded under the equity and liabilities in the statement of financial position.
Which of the subsidiary's account balances must always be eliminated?
The account balances eliminated during consolidation are intercompany debts, intercompany stock, elimination of intercompany revenue and expenses, intragroup dividends, and investments in subsidiaries.
Which of the parent company's account balances must always be eliminated and why must they be eliminated?
Since the subsidiary eliminates equity the parent company must eliminate income from subsidiary as well. The consolidation of group accounts absorbs revenues from the subsidiary and therefore should eliminate all intakes from the partnership of subsidiaries. The income accounts are eliminated to avoid overstating the accounts balances.
How might this process under a GAAP basis compare to that under an IFRS basis?
The GAAP gives two consolidation models while IFRS presents consolidation model for all entities. Similar or uniform accounting policies under American GAAP between the parent and subsidiary are not necessary but for IFRS standardized accounting policies are mandatory. GAAP allows different reporting dates for financial statements but under IFRS financial statements between parent and subsidiaries are reported on the same date.
Are there any ethical aspects that need to be addressed?
There are several issues that need to be addressed with regard to ethical accounting standards. First, fraudulent financial reporting where financial statements are misstated with the intention of misleading investors and stakeholders ( Humphrey et al., 2015) . There occurs misappropriation of assets where company assets are used for personal gains by the company management .
References
Bracci, E., Humphrey, C., Moll, J., & Steccolini, I. (2015). Public sector accounting, accountability, and austerity: more than balancing the books?. Accounting, Auditing & Accountability Journal , 28 (6), 878-908.
