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BU457 (10)
Lecture 2

BU457 Lecture Notes - Lecture 2: Cash Flow Statement, Book Value, Retained Earnings

Course Code
Bixia Xu

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Consolidated Cash Flows and Ownership Issues
1. Consolidated Cash Flow Statement:
Indirect Method: Start with NI and show adjustments to
convert it to a cash basis.
o EX: Depreciation, amortization, financing gains/losses,
Direct Method: Only the items affecting cash would be
presented in the first place.
Major Items include:
o Acquisition-date FV differences are depreciated.
o Dividends paid by the subsidiary to the parent do not
change consolidated cash.
o Change in the parent’s % of ownership.
2. Preparing the Consolidated Cash Flow Statement:
Sections: Operating, Investing, Financing
Easiest to prepared Consolidated CF but using
Consolidated BS and IS.
IAS 7: Only the net cash outflow from a business
combination needs to be presented on the cash flow
statement, and the details of the changes in non-cash
accounts be disclosed in the FS notes.
o Net Cash Outflow = cash paid for the shares of the
cash held by the subsidiary on the date of acquisition
Investing Activities
3. Changes in Parent’s Ownership Interest:
a) Parent buys more holdings in the subsidiary (block
b) Parent sells some of its holdings in the subsidiary.
c) Subsidiary issues more common shares to the public;
parent doesn’t maintain its previous ownership percentage.
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d) Subsidiary repurchases some of its common shares from
the NCI.
Note: If the Parent’s share changes, the NCI % changes.
Note: When the parent’s ownership %
increases/purchase (decreases/sale), a portion of the
unamortized acquisition differential will be transferred from
the NCI (Parent) to the Parent (NCI).
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