AFM491 Lecture Notes - Lecture 8: Equity Method, Book Value, Financial Statement

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM491
• Professor: Robert Ducharme

Document Summary

Internal monitoring: parent controls one or more entity, non-controlling interest. Subsidiary gets controlled: other owner of the subsidiary that is not the parent, eliminate duplicates or redundancies, eliminate intercompany transactions. Ias 27: many small companies and intermediaries. Shares presented as an investment on balance sheet: unconsolidated, cost, fair value profit and loss, equity method. Consol basic principles: consolidated are from parent"s point of view, downward looking, elements of all controlled entities are added together, balance sheet. Identifiable fv excess = fv of identifiable accounts - cv of identifiable accounts. Fv excess: allocate to a&l, good will, create account, consider how shares are required, cash, reduce cash account of parent. Xx: calculation of goodwill (acquisition method, acquisition cost (number of shares x price per share) , = goodwill. Journal entries: record investment in the company. Cr common shares/cash: to record acquisition differential. Cr investment in xx company: to allocate acquisition differential. Fv excess: goodwill, recognize investment in subsidiary, eliminate.