I remember we will use consolidate method, and it is 100% consolidate, but why I have impression in some question , we use 80% ratio to combine B/S and I/S. I could find out more detail, but before I spend time search , any body have any quick idea? Thanks.
General rule is 50% However, this could vary depending on “controlling factors” like seats in board, management influence, etc. in some cases even less than 50% could mean consolidation, in others greater than 50% would…
There is a comprehensive illustration solved on Scheweser to reflect the impact on financials due to use of different methods. In practice equity will only be for 20-50% stake unless there exist some special situations detailed by Guille_GE. thanks.
OP’s question is why sometimes you consolidate less than 100% of the assets and liabilities, *after* you have decided it is to be consolidated. This happens with the pooling method, which is no longer used. I don’t think there is less than 100% consolidation anymore…anyone confirms?
Yeah I don’t really get/remember the pooling method… Also I think the accounting rules used to have that “bright-line” rule of 20-50% or over 50%, but now it’s more based on if you actually have influence (equity method) or control (consolidation), any thoughts?
… one more time to clarify the question the OP is asking (at least that’s how I understand it), let us say company X buys 60% of company Y. Consolidation means you take 100% of company Y’s assets and liabilities and merge them into X’s. However, there are cases when you only take 60% of company Y’s assets and liabilities and merge them into X’s. Other than under pooling, do you ever do that?
yessir, control that minority interest
That’s correct Dreary, you are consolidating the whole 100% even though you don’t really own 100%, therefore that “minority interest” shows up as the % that the minority shareholders own.
AndrewUNH Wrote: ------------------------------------------------------- > That’s correct Dreary, you are consolidating the > whole 100% even though you don’t really own 100%, > therefore that “minority interest” shows up as the > % that the minority shareholders own. I can’t believe you still don’t get the question! He is asking why (sometimes) you only consolidate 60% or 70% or 80%, and not 100%. Let us say company X buys 60% of company Y. Consolidation means you take 100% of company Y’s assets and liabilities and merge them into X’s. However, there are cases when you only take 60% of company Y’s assets and liabilities and merge them into X’s.
and that is why we call some acquisitions “mergers” and why we call others “consolidations” Hollar!
Wouldn’t those cases be joint consolidation?
yes Dreary is correct. That would only be a case with “Pooling method” which is no longer allowed in any GAAP (US and IFRS). Propotionate consolidation still exists in IFRS but will only be applied in a 50-50 JV case, but not any other stake ratio.
Yes, that’s the word I was looking for: Propotionate consolidation.