Hi After knowing all the details about the Intercorp accounting, I am just thinking how to relate LOS 21.b accounting methods (equity, consolidation, proportionate consolidation) and LOS 21.c accounting for Business Combinations (Purchase vs. Pooling)? Sorry that I am a novice in Accounting - just start learning Accounting in the CFA programme. Appreciate someone can give me some guidance here.
realize that these are two different things. LOS 21b - is for when a company has an investment in another company. It is like you and I buying shares - but at a company level. Depending on the level of control - you account for it using the Equity, Consolidation or Proportionate Consolidation methods - with the appropriate rules. LOS 21 C - is for acquisition of one company by another. Purchase and Pooling methods are the options there. Currently only Purchase method is allowed - but Pooling of Interest method is necessary to know because it “restates” all prior periods - and the impact of a previous Pooling method would still be felt later. Hope this helps
Really thanks for pointing this out for me, cpk123. It may look trivial to somebody else but this is something I just overlooked when reading the text. Can I say “Business Combination” is for situation like “Merge & Acquisition” where 2 companies will operate in a single entity and for normal investment (ie the investor and investee are still operating separately), we will be using LOS 21b accounting methods?