What
is parent company?
When a company has power to control the other company,
then controlling company is known as parent and the company which is being
controlled known as subsidiary.
What
is control in consolidation?
Control means 50% shares
in the subsidiary, 50% voting power by virtue of agreement, power of govern
financial or operating policies, majority of voting right in board of director
meeting, power to appoint majority of board of director.
How
investments in subsidiary appear in parent company accounts?
The investment in
subsidiary appears in parent account “as investment at cost”. This investment
in cost disappears in consolidated accounts and reflected in term of asset and
liabilities of subsidiary.
How
accounts of subsidiaries are consolidated?
Consolidation is combined
reporting of parent and subsidiary. The assets and liabilities of parent and
subsidiaries are added other than capital and reserves.
Which
subsidiary is not consolidated?
A subsidiary purchased
with intent to dispose in short term is not subject to consolidation instead
deal as asset held for sale.
What
is accounting treatment of transaction cost in consolidation?
The transaction cost are
treated as expense and not included in the cost of investment or cost of
purchase.
