高级会计学(第10版)教师手册Beams10e_IM_7.pdf

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1、 2009 Pearson Education,Inc.publishing as Prentice Hall 115 Chapter 11 CONSOLIDATION THEORIES,PUSH-DOWN ACCOUNTING,AND CORPORATE JOINT VENTURES Chapter Outline CONSOLIDATION UNDER PARENT COMPANY AND ENTITY THEORIES(Illustration 11-1)A Contemporary theory evolved from practice and it essentially an e

2、ntity approach to the preparation of consolidated financial statements.B Traditional theory reflected parts of both the parent-company theory and the entity theory.C Underlying assumptions of the parent company theory are summarized as follows:1 The viewpoint is that consolidated financial statement

3、s are an extension of parent company statements and are prepared from the viewpoint of parent company shareholders.2 Consolidated net income is a measure of income to the parent company stockholders.3 Noncontrolling interest is a liability from the viewpoint of parent company shareholders.4 Similari

4、ly,noncontrolling interest expense is considered an expense from the viewpoint of the majority shareholders.5 Subsidiary assets and liabilities are initially consolidated at their book values plus the parents share of any excess of fair value over book value.a Subsidiary net assets are revalued only

5、 to the extent acquired by the parent company.6 The noncontrolling interest in subsidiary assets and liabilities is consolidated at book value.7 All unrealized gains and losses from downstream intercompany sales are eliminated until realized.2009 Pearson Education,Inc.publishing as Prentice Hall 116

6、 8 Unrealized gains and losses from upstream intercompany sales are eliminated to the extent of the parent company ownership interest.a The amount not eliminated is considered realized for noncontrolling shareholders.D Underlying assumptions of the entity theory are summarized as follows:1 The viewp

7、oint is that of the consolidated entity as a whole.a The consolidated statements should provide information for all interest holders.2 Total consolidated net income is a measurement of income to all equity stockholders,and it is allocated in the financial statements to majority and noncontrolling in

8、terests.3 Noncontrolling interest is an equity interest shown in the stockholders equity section of the consolidated balance sheet.4 Subsidiary assets and liabilities are consolidated at their fair values.5 A total subsidiary value is imputed from the price paid by the parent company for its majorit

9、y interest.6 All unrealized gains and losses from downstream intercompany sales are eliminated until realized.7 Unrealized gains and losses on upstream intercompany sales are eliminated by allocating them proportionately to majority and noncontrolling interests.E See Exhibit 11-1 in the text for a c

10、omparison of consolidation theories.F Consolidated Stockholders Equity:Contemporary theory differs slightly from entity theory in reporting consolidated stockholders equity.Under entity theory,both controlling and noncontrolling interests are components of consolidated equity.Further,entity theory w

11、ould show the components of each interest,i.e.,breaking the controlling and noncontrolling interests into their respective shares of contributed capital and retained earnings.Under SFAS No.160,the noncontrolling interest is shown as a single,combined amount under consolidated stockholders equity.200

12、9 Pearson Education,Inc.publishing as Prentice Hall 117 PARENT COMPANY ACCOUNTING UNDER THE EQUITY METHOD A Parent company and entity theories do not affect parent company accounting under the equity method.1 This is because the extra values under entity theory were reflected in the noncontrolling i

13、nterest,not the majority interest.B The separate company statements will be the same for the parent and subsidiary under both theories.C Consolidated statements are affected,however,and different amounts are likely for consolidated assets,liabilities,and noncontrolling interests.PUSH-DOWN ACCOUNTING

14、(Illustration 11-2)A Under push-down accounting,the fair values of an acquired subsidiarys assets and liabilities are recorded in the separate financial statements of the purchased subsidiary.1 The SEC requires push-down accounting in its filings when a subsidiary is substantially wholly owned(usual

15、ly 97%)with no substantial publicly held debt or preferred stock outstanding.2 Push-down accounting affects only the subsidiarys separate financial statements.a Without push-down accounting,the allocation of the purchase price to identifiable assets and goodwill is done in the consolidation working

16、papers.b Under push-down accounting,the allocation is done on the books of the subsidiary.c Consolidated financial statements are exactly the same under either procedure.B Supporters of push-down accounting are not in agreement regarding 1 The percentage ownership necessary for push-down accounting,

17、and 2 Whether the allocation should reflect 100%of the fair values of the subsidiarys assets and liabilities if less than a 100%change in ownership has occurred.2009 Pearson Education,Inc.publishing as Prentice Hall 118 C Push-down accounting can be applied under either parent company theory or enti

18、ty theory.1 Push-down accounting under parent company theory:a Cost/book value differentials are allocated in the usual manner.b The values from the allocation schedule are pushed down to the subsidiary records.The subsidiary makes a journal entry to revalue assets and liabilities,eliminate retained

19、 earnings,and enter push-down capital.(1)For example,if a 90%interest is purchased,90%of the difference between cost and fair value is pushed down to the subsidiarys books.2 Push-down accounting under entity theory:a A total value of the subsidiary is imputed from the price paid by the parent for th

20、e interest acquired.(1)The excess implied value over the book value of the subsidiarys net assets is assigned to the individual assets and liabilities on the basis of 100%of the fair value/book value differentials and the remainder to goodwill.(2)For example,if a 90%interest is purchased,100%of the

21、implied value(difference between cost and fair value)is pushed down to the subsidiarys books.b The subsidiary makes a journal entry to revalue assets and liabilities,eliminate retained earnings,and record push-down capital.JOINT VENTURES A Joint ventures are business entities that are owned,operated

22、,and jointly controlled by a small group of investors(venturers)for the conduct of specific business undertakings that provide mutual benefit for each of the venturers.1 No single venturer controls the operations.B Joint ventures may be organized as corporations,partnerships,or undivided interests.T

23、he AICPAs SOP 78-9 defines the following forms of joint ventures:2009 Pearson Education,Inc.publishing as Prentice Hall 119 1 A corporate joint venture is a corporation owned and operated by a small group of venturers to accomplish a mutually beneficial venture or project.a Venturers that can partic

24、ipate in the management of the corporate joint venture and hold no more than 50%interest in the venture account for their interest by the equity method.b A corporation that is a subsidiary of another corporation is not a corporate joint venture.(1)The subsidiary is consolidated in the financial stat

25、ements of the majority owner.The other investors account for their investments under the equity method.2 Unincorporated joint ventures include the following:a A general partnership is an association in which each partner has unlimited liability.A limited liability partnership is an association in wh

26、ich one or more general partners have unlimited liability and one or more partners have limited liability.(1)Although APB Opinion No.18 applies only to investments in common stock,Interpretation No.2 concluded that many of the provisions of the equity method from APB 18 should be applied to investme

27、nts in unincorporated joint ventures.(2)Partnership profits and losses accrued by the venturers are generally reflected in the partners financial statements.(3)The elimination of intercompany profits and losses is generally appropriate.b An undivided interest is an ownership arrangement in which two

28、 or more parties jointly own property and title is held individually to the extent of each partys interest.Each venturer is proportionately liable for the venturers share of each liability.(1)Some undivided interests are accounted for in the same manner as partnership joint venturers.(2)Others follo

29、w specialized industry practices in which each venturer accounts for its pro rata share of the assets,liabilities,revenues,and expenses of the joint venture in its own financial statements.This is called pro rata or proportionate consolidation.2009 Pearson Education,Inc.publishing as Prentice Hall 1

30、20 VARIBALE INTEREST ENTITIES A The FASB coined the term variable interest entity in FIN 46(R)1 A variable interest entity(VIE)is a special purpose entity,which will require consolidation due to contractual or financial arrangements other than voting interests.B A variable interest entity can take t

31、he form of a partnership,limited liability company or trust-type arrangement.1 A potential VIE must be a separate entity,not a subset,branch or division of another entity.2 Pensions and certain other entities are specifically excluded.C The FASBs definition of VIEs requiring consolidation encompasse

32、s situations where a company may only own a minimal voting equity interest,but be contractually required to provide additional financial support in the event of future operating losses.D Primary beneficiaries are required to consolidate VIEs.1 An enterprise shall consolidate a VIE if it has a variab

33、le interest that will absorb a majority of the VIEs expected losses,receive a majority of the VIEs expected returns,or both.2 If one entity will receive the majority of a VIEs losses,and another the majority of residual returns,the one absorbing the losses consolidates the VIE.E All enterprises hold

34、ing a significant interest in a VIE must provide certain disclosures.1 The primary beneficiaries of a VIE must provide more extensive disclosures than the other enterprises not deemed the primary beneficiary.F The primary beneficiary consolidates based on fair value on the date they become primary b

35、eneficiary.1 If the primary beneficiary has transferred assets to the VIE,they are transferred at book value and no gain or loss is recorded on the transfer.2009 Pearson Education,Inc.publishing as Prentice Hall 121 2 Goodwill may be recorded only if the VIE is a business (as defined in FIN 46(R).Ot

36、herwise,any excess of consideration paid over fair value of assets is treated as an extraordinary loss.3 Estimating fair value may be challenging if the VIE invests in unique assets;firms may need to use expected future cash flows as a means of estimating fair value.ELECTRONIC SUPPLEMENT This provid

37、ed a discussion of how consolidation might be altered if a current cost approach were adopted.2009 Pearson Education,Inc.publishing as Prentice Hall 122 Description of assignment material Minutes Questions(12)Exercises (13)E11-1 7 MC general questions(parent company and entity theories)14 E11-2 5 MC

38、 general questions(Joint ventures)10 E11-3 5 MC problem-type questions(parent company and entity theories)20 E11-4 Pond/Staff Computations(parent company and entity theories)20 E11-5 Perry/Shelly Computations under parent company and entity theories 20 (fair-book value differentials)E11-6 Polak/Stah

39、l Computations under parent company,entity and contemporary 20 theories(mid-year acquisition and goodwill)E11-7 Palumbo/Seal Computations under parent company and entity theories 15 (upstream sales)E11-8 Palid/Stark Compute consolidated net income under the three theories 15 (upstream and downstream

40、 sales)E11-9 Pioneer/Security Journal entries for push-down accounting(parent 20 company and entity theories)E11-10 Sun-Belt Determine investment income for venturers of a corporate 12 joint venture E11-11 Martin Determine amount of noncontrolling expense to appear in 15 consolidated income statemen

41、t E11-12 Paxel/Polo Required financial reporting and disclosure requirements for 15 a VIE E11-13 Jennifer/Laura Determine the primary beneficiary of a VIE 10 Problems (12)P11-1 Picody/Scone Consolidated balance sheets(parent company and entity 30 theories)P11-2 Pisces/Scorpio Consolidated balance sh

42、eet and income statement under 30 entity theory P11-3 Palace/Sign Computations(parent company and entity theories)30 P11-4 Pierre/Smedley Comparative consolidated financial statements under 50 alternative theories(goodwill and intercompany inventory sale)P11-5 Packard/Studs Comparative balance sheet

43、s under traditional and 40 entity theories(goodwill and upstream inventory sale)P11-6 AICPA X/Y Computations and explanations(separate company 70 and consolidated financial statements given-entity theory)P11-7 Played/Splash Prepare a journal entry to record the push down,prepare a 30 subsidiary bala

44、nce sheet,and determine investment income for a 100%owned subsidiary P11-8 Parker/Sanue Journal entries and calculations for push-down accounting 30 with noncontrolling interest 2009 Pearson Education,Inc.publishing as Prentice Hall 123 P11-9 Power/Swing Journal entries and comparative balance sheet

45、s at acquisition 25 for push-down accounting at acquisition P11-10 Power/Swing Two consolidation working papers one year after combination 70 under push-down accounting(both 90%and 100%ownership assumptions)P11-11 Pepper/Jerry Working papers for proportionate consolidation(joint venture)50 Internet

46、assignment Using the Corning,Incorporated 2006 annual report from the website,prepare a summary of joint venture activities.Illustration 11-1 2009 Pearson Education,Inc.publishing as Prentice Hall 124 COMPARISON OF PARENT COMPANY THEORY AND ENTITY THEORY ASSET VALUATION Pet Company acquires a 90%int

47、erest in Sam Company for$63,000 on January 1,20X2.Book values and fair values of Sams assets and equities are summarized as follows:Book Value Fair Value Difference Other current assets$40,000$40,000 Inventories 15,000 20,000$5,000 Plant assets-net 30,000 38,000 8,000 Total assets$85,000$98,000 Liab

48、ilities$38,000$38,000 Capital stock$10 par 25,000 Retained earnings 22,000 Total equities$85,000 Allocation of Purchase Price under Parent Company Theory:The parents share of subsidiary assets and liabilities are revalued.Cost$63,000 Book value acquired($47,000 x 90%)42,300 Excess cost over book val

49、ue acquired$20,700 Excess allocated to:Inventories($5,000 x 90%)$4,500 Plant assets-net($8,000 x 90%)7,200 Remainder to goodwill 9,000 Excess cost over book value acquired$20,700 Allocation of Purchase Price under Entity Theory:A total implied value for the subsidiarys assets and liabilities is comp

50、uted based on the price paid for the parents 90%share.Implied value of Sam($63,000/90%)$70,000 Book value of Sams net assets 47,000 Excess implied value over book value$23,000 Excess allocated to:Inventory(100%of difference)$5,000 Plant assets-net(100%of difference)8,000 Remainder to goodwill 10,000