Consolidation accounting

In this lesson

1. 0:00 Consolidation Process Overview
2. 0:39 Establishing Control and Parent-Subsidiary Relationship
3. 2:17 Investment Elimination and Cancellation
4. 4:07 Understanding Goodwill Concept
5. 5:11 Goodwill Calculation Formula
6. 7:02 Goodwill Worked Example
7. 9:07 Fair Value of Consideration and Assets
8. 10:06 Share-Based Consideration Illustration
9. 11:32 Fair Value Adjustments in Consolidation
10. 13:18 Goodwill with Fair Value Adjustments
11. 15:00 Group Retained Earnings Calculation
12. 16:47 Group Retained Earnings Worked Example
13. 18:35 Non-Controlling Interest Valuation
14. 19:54 Non-Controlling Interest Worked Example
15. 21:38 Consolidating Assets and Liabilities
16. 22:40 Treatment of Revaluation Reserves

About this lesson

Consolidation accounting brings together the assets, liabilities, and equity of two separate entities into one group statement of financial position, but requires careful elimination of inter-company transactions and calculation of key figures like goodwill and group retained earnings. You'll work through the consolidation process step by step: establishing control through ownership percentage, eliminating the parent's investment in the subsidiary, calculating goodwill (the premium paid above net asset value), and determining group retained earnings by combining the parent's profits with the parent's share of post-acquisition subsidiary profits. The lesson covers fair value adjustments to subsidiary assets, noncontrolling interest calculations for minority shareholders, and the correct treatment of share capital, share premium, and revaluation reserves on the consolidated statement. By the end, you'll understand why certain line items are added together and others are eliminated, how to handle both cash and share consideration in acquisitions, and how to split post-acquisition profits between group and minority shareholders. This knowledge directly supports exam success and is essential for understanding how large corporate groups report their financial position.

Duration: 24m