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Chapter 10

Additional Consolidation Reporting Issues
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The 1st and 2nd elimination entries are for the post-acquisition equity adjustments to the investment account and non-controlling interest, as usual. The 3rd elimination entry must include eliminating the income statement accounts (beginning of the year to acquisition date).
When a subsidiary is acquired in the middle of the accounting period what are the changes to regular elimination entries?
They may consolidate their taxes. Inter-company transfers will not be taxed until exchanged with a third party. One company's losses may be offset by the other company's profits.
If a parent owns 80% stock of a subsidiary what special tax maneuver is permitted?
Since inter-company profits are eliminated on both financial and tax returns there are no temporary differences. No DTA (deferred tax assets) or DTL (deferred tax liabilities) necessary.
How are unrealized inter-company profits eliminated when a consolidated tax return is filed?
Since for tax purposes inter-company profits will be taxed while financial statements wait until sale to a non-affiliate, to eliminate the excess tax expense we create a deferred income taxes account. The additional elimination entry looks similar to :
Deferred Tax Asset XXX
Income Tax Expense XXX
How are unrealized inter-company profits eliminated when separate tax returns are filed?
Parents share of the consolidated Net Income +/- Adjustment for Parent Securities - (Parent Ownership % Income available to common share holders of sub) + (shares held by parent subsidiary diluted EPS) ALL DIVIDED BY (Weighted average of parent company shares outstanding + shares of parent to be issued if dilutive securities are converted and options exercised). If you got all that they your a boss!
Diluted Consolidated Earnings Per Share, How do you calculate it?