高财第11章（英文版）
2016-11-15 23:16:43 2 举报AI智能生成
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Consolidation Theories
Parent Company Theory
Consolidated financial statements
Extension of parent company statement
Viewpoint of parent company shareholders
Prepare consolidated statements
To benefit parent company shareholders
Noncontrolling interests
Have the separate (subsidiary) statements
Entity Theory
Consolidated financial statements
Viewpoint of the total business entity
All resources of the entity are valued consistently
Income of noncontrolling interests is a distribution of the total business income
Income Reporting
Parent company theory and traditional theory
Consolidated net income is income to the parent company shareholders
Entity theory
Total consolidated income is to be shared between the controlling and noncontrolling interests
Asset Valuation
Parent company theory and traditional theory
Assets and liabilities are adjusted to market value at acquisition, but only to the extent of the parent's ownership share.
Entity theory
Assets and liabilities are consolidated at fair value
Unrealized Gains and Losses
Parent company theory
Unrealized gains and losses attributable to the subsidiary are only eliminated to the extent of the parent's ownership
Entity theory and traditional theory
Unrealized gains and losses are eliminated
All theories treat downstream gains and losses the sam
Consolidated Stockholders' Equity
Contemporary theory
Noncontrolling interest is a single amount and a part of stockholders' equity
Entity theory
Noncontrolling interest is also part of stockholders' equity
It would be decomposed into paid in capital, retained earnings
Other ideas being promoted
Use footnote disclosure for CI and NCI shares of consolidated income
Use proportional consolidation, excluding NCI from the statements
Push-Down Accounting
SEC Requires Push-Down
SEC requires push-down accounting for SEC filings when the subsidiary
Is substantially fully owned (97%)
Has substantially no public debt or preferred stock
Establishes a new basis for the assets and liabilities
Based on acquisition price
Arguments against
Subsidiary is not party to the acquisition
Subsidiary receives no new funds, sells no assets
Push-Down Procedure
Assets and liabilities are revalued
Goodwill, if any, is recorded
Retained earnings (prior to acquisition) are eliminated
Push-down capital replaces retained earnings
Includes old retained earnings
Any adjustments to assets and liabilities, including goodwill
Push-Down Differences
The example used 90% ownership by the parent.
SEC requires push-down accounting
Differences between the methods of application will be considerably less
Leveraged Buyouts with a change in controlling interest
Changing accounting basis may be appropriate
Joint Ventures
Corporate Joint Ventures
Investors who participate in the overall management of the joint venture
Use equity method for the joint venture
If significant influence is not present, use the cost method
Investors with more than 50% of the voting stock have a subsidiary, not a joint venture
Consolidate the subsidiary
Unincorporated Joint Ventures
application of the equity method to unincorporated joint ventures is appropriate
Industry specific practice
Proportional consolidation in oil & gas and undivided interests in real estate ventures
Identify Variable Interest Entities
Variable Interest
The primary beneficiary of the variable interest entity (VIE) must consolidate the VIE.
Primary Beneficiary
The entity that will
Absorb the majority of the expected losses, receive a majority of the expected gains or both
If separate entities are expected to absorb the profits and losses, the entity expected to absorb the losses is the primary beneficiary
The primary beneficiary may be an equity holder and/or creditor of the VIE
Consolidate Variable Interest Entities
Special Consolidation Considerations
VIEs are consolidated like other subsidiaries
Exception
Goodwill can only be recorded if the VIE is a "business" FIN 46(R)
If the VIE is not a "business," the excess paid is an extraordinary loss
"business"
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