Elimination Entries when Consolidating Financial Statements

This video is a overview of eliminating intercompany activity when preparing consolidated financial statements under ASC 810. ASC 810 is the GAAP standard for the consolidation of business legal entities. Watch this Video Next ➡️ • Pulling Together Conso...
Watch the full Consolidation Accounting Series ➡️ • Accounting and Finance...
Consolidation Accounting considerations to think through:
1) Why do you consolidate legal entities?👉 A larger business generally speaking is made up multiple entities which reflect a full economic entity.
2) What are you consolidating?👉 You are consolidating entities that are controlled through ownership and/or have the power to control an entity. Consolidation accounting reflects the total combined assets, liabilities, revenue and expenses along with eliminating any intercompany activity.
3) When do you consolidate financial?👉 There are various reasons to consolidate a full economic entity, but several include: financing, audits, equity raises, public company reporting, etc.
4) How do you consolidate business entities?👉 Follow ASC 810 which defines how a parent entity should consolidate controlling financial interest either by a voting interest or by variable interest.
👍Supporting resources:
➡️Equity Method Accounting - GAAP Accounting for Investments • Accounting for Equity ...
➡️Twitter Thread on Consolidated Financial Statements: / 1679913600259850262
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[@patrickbrayCPA]

➡️ Part #1: What are Consolidated Financial Statements?
ruclips.net/video/axc3o2rUFDY/видео.html

[@juuelikkas6685]

thanks Patrick

[@patrickbrayCPA]

Glad that was helpful 👍

[@mohamedroshan5670]

Hi can anyone help me on below.
Parent entity disposed during the year its fully owned subsidiary.
The investment value recorded in the parents book was 1,000 and disposed for 5,000. As at the date of disposal the Net asset of the subsidiary was 750.
So at the parents books the gain on disposal will be 4,000(5,000-1,000)which will be recorded under other income.
At consolidation level the gain will 4250(5,000-750).
How we should treat these both the gain in the consolidation.

[@patrickbrayCPA]

Question for you: how come
the investment in sub didn’t equal the net assets (equity) of the subsidiary?

[@mohamedroshan5670]

@@patrickbrayCPA due to profit or loss generated throughout

[@patrickbrayCPA]

Unless I’m missing something why wouldn’t the parent recognize the sub’s earnings on a stand alone basis before the sale?