I don’ think this should be that hard, but I am a little confused.
Example:
Company 1 has a 50% interest in company 2 and company 1 is deemed to have control.
When consolidating the financial statemetns what % of company 2 assets, liab., revenue, and income will company 1 show on it’s financial statements?
EOC Questions 7 - 12 for this chapter make it seem as if Company 1 will record 100% of company 2 assets/liab. on it’s own balance sheet, 100% of revenue, and only 50% of net income.
If that is correct, why does company 1 record 100% of company 2 revenue, but only 50% of income? (or maybe I am just misunderstanding)
Thanks.作者: towardsutopia21 时间: 2013-4-8 12:52
When consolidating it takes on the full assets and liabil, revenue expenses, but it subtracts minority interest before NI, so that brings net income down to the 50% mark if you know what I mean作者: rkapoor 时间: 2013-4-8 12:52
Right, we gross it all up acting like we own 100%, but we really don’t, so back out the 50% minority interest. Net income is equal among all methods.作者: liquidity 时间: 2013-4-8 12:53
Ok that is what I thought…..so profit margin will be lower when a company has control (shows 100% revenue, 50% of income) vs. signficant influence (0% revenue, 50% income) correct?
