Controlling Interest

Book 2: Page 10: Exhibit 1 The accounting methodology for a controlling interest is “Consolidation” Page 29 : 6.2 Purchase Method IFRS and US GAAP currently require the purchase method of accounting… According to my understanding, it looks like the exhibit 1 is an error. Anyone ?

remember there are two aspects. consolidation is when it is still an investment. purchase method is when two companies are merging and becoming a “bigger” company - it is still an investment - but there is a different spin on it at that time (for one time you would have to essentially merge the books). Say Company A and Company B - originally Company B was an investment on the books, accounted for by the Consolidation method - and then the two companies decided to become one - the effect of the consolidation would have to be backed out, and the Purchase method would then apply…

Nope no error, the purchase method is just one of the ways via which consolidation is achieved/carried out under the existing accounting standards (another would be pooling, which is no longer permitted).

If there is controlling interest (different to significant interest) then you have to consolidate the balance sheets. This can be done in two ways - Pooling Method or Purchase Method. The Pooling method is no longer allowed under USGaap or IFRS, but we still need to know how to do it because past statements may have used it.