Page Title
ACC 401
Module 3
Alternatives
• Initial value method
• Equity method
• Partial equity method
Required Procedures
• Acquisition was made during the current fiscal period.
- Parent adjusts its own Investment account to reflect
the subsidiary’s income and dividend payments as well
as any amortization expense.
- Worksheet entries used to establish consolidated
figures.
• Acquisition was made during a previous fiscal period.
- Most consolidation remains the same.
- Amount of the subsidiary’s stockholders’ equity to be
removed.
- Allocations established will also change in each
subsequent consolidation.
Other Than the Equity Method
• Initial value method applied by the parent company
• Partial equity method is in use
• Periods after the year of acquisition
- The initial value method recognizes neither income
in excess of dividend payments nor excess
amortization expense
- The partial equity method does not recognize excess
amortization expenses
Bargain Purchases
• Occurs when the parent company transfers consideration
less than net fair values of the subsidiary’s assets
acquired and liabilities assumed
• Parent recognizes an excess of net asset fair value over
the consideration transferred
Push-Down Accounting
• A subsidiary may record any acquisition-date fair value
allocations directly in its own financial records rather than
through the use of a worksheet.
• Push-down accounting reports the assets and liabilities of
the subsidiary at the amount the new owner paid.
• Push-down accounting can also make the consolidation
process easier.