RSM321H1 Chapter Notes - Chapter 5: Pro Forma, Effective Interest Rate, Equity Method

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Published on 23 Mar 2016
School
UTSG
Department
Rotman Commerce
Course
RSM321H1
RSM 321: Textbook Notes
Chapter 5: Consolidation Subsequent to Acquisition Date
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Document Summary

A parent can account for a subsidiary in internal accounting records in periods subsequent to the date of acquisition using the following methods: cost method. Investments are initially recorded at cost and income (dividends) from the subsidiary is recognized in ni when the dividend is declared. The investment is subsequently kept at cost on the parent"s separate- entity bs. Usually the only entry made in the investor"s book relates to the dividends received or the odd impairment loss: equity method. Investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor"s share of na"s of the investee. Investor recognizes their portion of the investee"s ci/l as an increase in the cv of the investment and in ni: amounts keep their source profit from continuing/discontinued operations, oci, etc. Dividends received from an investee reduce the cv of the investment.

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