08 April 2010
How should one treat this while preparing holdind co. B/s(treatment of pre acqn profits):- The shares(of subsidiary co.)purchased on 31.7.1999, are ex dividend & Ex bonus from existing share holders... Dt of acqn no's cost 1.4.99 8000 110000 31.7.99 6000 86000 Total shares in subsidiary co-20000
The a/c's of Holding co are prepared as on 31.3.2000.
08 April 2010
While preparing the consolidated financial statements of holding company, the pre acquisition profit would be deducted from the investment made in subsidiary for calculating the cost of capital. In your query, the investment is made by the holding in subsy two times. At the time of first acquisition, the company in which investment was made, has not become the subsy of the holding and would be treated as per AS-13, Accounting for investments. Later on the company purchased further shares in same company and now the company is holding 70% shares of the subsy company.
Now your question might be from which date pre acquisition profit would be calculated or whether to calculate pre acquisition profit separately for each acquisition date.
According to para no. 15 of AS-21 (Indian accounting standards,If an enterprise makes two or more investments in another enterprise at different dates and eventually obtains control of the other enterprise, the consolidated financial statements are presented only from the date on which holding-subsidiary relationship comes in existence.
So, the pre-acquisition profit would be prior to date from which the investment become investment in subsy i.e. more than 50%.
Thank you for ur reply,but i guess i was not very clear with my question,my actual doubt is that,does it make any difference,coz the controlling interest is acquired in the middle of the year.,and also since shares purchased are ex dividend & ex bonus.,the treatment of dividend and bonus shares in calcn of preacqn profits....I should have mentioned this earlier,Sorry for that...
CAclubindia
