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bleach

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tT
发表于 2011-7-11 19:36 | 只看该作者

Proportionate Consolidation

searching, 2011, regarding, summarize
Book 2 of 2011 CFAI Text, page 185, #5:

"If Connamon is deemed to have significant influence, it would report half of Cambridge's net income as a line item on its income statement"

This is as a result of owning 19% of the company??

I thought NI was the same for all 3 methods? I am searching the internet, but no source seems to summarize how NI, Assets, Liabilities, and Equity differ regarding the Equity, Proportionate Consolidation, and Consolidation Methods
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genuinecfa

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发表于 2011-7-11 19:36 | 只看该作者
Net Income will be the same for all 3 methods.


Consolidated and Proportionate will have a direct affect on sales and other line items on the I.S. and B.S..

The Equity method on the other hand only affects Retained Earnings and Net Income. Thus with no adjustment to Sales(denominator) and the Net Income (numerator) being increased leads to the largest net profit margin.

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Otabek

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3#
发表于 2011-7-11 19:36 | 只看该作者
OK so to summarize,

NI - reported proportionally regardless of method

Assets, Liabilities, Revenue = 0, proportion to ownership, and 100% for equity, proportionate consolidation, and consolidation, respectively?

Please confirm if you can, or add corrections, greatly appreciated!

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scarecrow

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4#
发表于 2011-7-11 19:36 | 只看该作者
Under equity method, there will be a line item in assets called investments in associates. This number begins at the price paid for the ownership stake, is increased by the parent's share of NI and decreased by their share of dividends.

The other items are correct. Be wary of NCI and goodwill on the B/S under full consolidation.

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YAhmed

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5#
发表于 2011-7-11 19:36 | 只看该作者
If you buy less than 20% of a company, you have to record it as either available-for-sale or held-for-trading, and you record it at fair value/market value.

If you buy more than 20% and less than 50% *but* most importantly you have no control over the company, then you record it using equity method, as grumble stated above.

If you own more than 50% (or you have control), then you add *all* assets and liabilities of the company to your assets and liabilities. To account for parts that you don't own, you have to deduct from your equity the minority interest, and also from your income statement you have to deduct earnings not yours.

... sounds about right.

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