Consolidating financial statements equity

Consequently, the concept of VIEs requires consolidation of entities that are financially controlled through special contractual arrangements rather than through voting stock interests.

For non-VIEs, the voting interest model is used that considers the actual share of voting rights.

This Statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary.If Federated Department Stores, the owner of Macy's and Bloomingdale, purchased five percent of Saks Fifth Avenue, Inc., common sense tells us that Federated would be entitled to five percent of Saks' earnings.How would Federated report their share of Saks' earnings on their income statement?It depends on the percentage of the company's voting stock Federated owned.The company would not be able to report its share of Saks' earnings, except for the dividends it received from the Saks stock.The point is, the income statement would never show the five percent of Saks' annual profit that belonged to Federated.Only dividends paid on the Saks shares would be shown as dividend income (which is, actually, added to total revenue or sales in most cases).For instance, if one party owns 30 percent of common stock and the remaining shares of the company are spread out among a large number of small investors, then that party would be considered to have an effective control over the company even though the party has less than 50 percent of voting shares.Moreover, in practice investors may possess an equal number of shares (50-50 percent or near).The relative size of ownership (generally, more than 50 percent of shares) is the key factor in assessing existence of control.However, in certain circumstances, under effective control concept control may exist with less than 50 percent of ownership.

Leave a Reply

Your email address will not be published. Required fields are marked *

One thought on “consolidating financial statements equity”

  1. You may have a little less hair, a few more more wrinkles, and a wider waist these days, but don’t let the reality of not being in your 20s or 30s anymore lead you to think that your appeal has diminished. Today you’re older, wiser, and should carry yourself with more confidence than you did in your 20s.

  2. E-Dating System is a fully featured professional dating system that works with flat file database. Start your own dating website with this completely automated script.