Consolidation of Accounts - Analysis and Reporting of Financial Data

The assignment analyzes the consolidation of accounts, a crucial process in financial reporting, particularly when a company acquires a majority stake in another. The report examines the steps involved in consolidation, including calculating goodwill, adjusting for pre-acquisition entries, and eliminating unrealized profits from intercompany sales. It explains how to handle depreciation differences and unrealized profits from plant sales, culminating in the preparation of a consolidated financial statement. The report references accounting principles and processes to ensure accurate financial representation. It covers the practical application of these concepts. The report also references the use of adjustments to ensure accuracy in financial statements. The report concludes with a discussion on the importance of these steps in the overall financial reporting process, and how they ensure that the consolidated financial statements accurately reflect the financial position of the combined entity.

Running head: CONSOLIDATION OF ACCOUNTS
Consolidation of Accounts
Name of the Student
Name of the University
Author note

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CONSOLIDATION OF ACCOUNTS
Table of Contents
Consolidated worksheet entries..................................................................................................2
Bibliography...............................................................................................................................6

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Consolidated worksheet

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Analysis and interpretation
The process of combining the financial results of different subsidiary companies into
a consolidated financial statement of the company which is acquiring the minor company.
This process is used when the acquiring company acquire more than 50% of the shares of the
minor company. In this case the fluffy ltd acquired all the shares issued by glider for an
amount of $30,000 in cash and 20000 shares of $3 per share. On this date the equity of glider
consist of $66000 share capital and the value of the retained earning of the company is
$6000.
The consolidation process includes the following steps
In the first it is required to calculate the goodwill which can be done by deducting the
net fair value of the assets and liabilities of glider from the total consideration paid by fluffy.

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In the second step it is required to post journal entries for valuation this is done by
debiting the goodwill amount and crediting the business combination valuation reserve.
In the third step the pre acquisition entries are made where the share of glider is
adjusted with the retained earnings, business combination value reserve and share capital of
glider.
After that in the next step sales and profit included in the inventory are adjusted to
eliminate the unrealised profit on inter company sales.
In this step the adjustment entries are made for elimination of difference in
depreciation and to adjust the unrealised profit in sales of plant. After all these adjustment
entries the final consolidation statement is prepared.

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Bibliography
Aprin, M., Enander, R.U., Wärn, M.O., Törngren, P.M., Walterfeldt, L.F. and Wilsson, J.C.,
International Business Machines Corp, 2019. Consolidation process command center. U.S.
Patent Application 10/169,813.
Caruana, J., 2016, September. Shades of governmental financial reporting with a national
accounting twist. In Accounting Forum (Vol. 40, No. 3, pp. 153-165). Taylor & Francis.