Need help with consolidating financial statements
Treatment to the acquired company: The acquired company records in its books the receipt of the payment from the acquiring company and the issuance of stock.
FASB 141 Disclosure Requirements: FASB 141 requires disclosures in the notes of the financial statements when business combinations occur.
To consolidate, first prepare the financial statements for your parent company and its subsidiary.
Next, use a separate worksheet for each statement to remove any intercompany transfers or sales.
Upon consolidation, the original organizations cease to exist and are supplanted by a new entity.
A parent company can acquire another company by purchasing its net assets or by purchasing a majority share of its common stock.
If the acquired company is liquidated then the company needs an additional entry to distribute the remaining assets to its shareholders.
Treatment to the acquired company: The acquired company records in its books the elimination of its net assets and the receipt of cash, receivables or investment in the acquiring company (if what was received from the transfer included common stock from the purchasing company).Consolidated financial statements provide an overall picture of the financial health and performance of a company and its wholly owned or majority-owned divisions and subsidiaries.