F3 - Combined Financial Statements/push Down Accounting

Front 1

Combined Financial Statements

Back 1

Combined financial statements of a group of related companies (not consolidated because there is no parent company)

Front 2

What are the types of combined financial statements?

Back 2

1. Companies are under common control (e.g., individual owns man companies), or

2. Companies are under common management

3. Unconsolidated subsidiaries (e.g., many foreign subs) are combined

Front 3

What are the requirements for combined financial statements?

Back 3

All intercompany transactions and balances among the related companies are eliminated.

Minority interests are treated as in consolidated financial statements.

Equity accounts are added across, not eliminated.

Income statement accounts are added across.

Front 4

What is Push Down Accounting?

Back 4

Push down accounting reports assets and liabilities at fair value in separate financial statements of the subsidiary. In effect, consolidation adjustments are pushed down into the records (and separate financial statements) of each subsidiary.

Front 5

What adjustments are made in Push Down Accounting?

Back 5

A. Assets & liabilities are adjusted.

B. Retained earngings of the subsidiary are transferred to paid-in capital (to the extent of the parent company's % of ownership).

C. Net income of each subsidiary includes depreciation, amortization, & interest expense based on fair values rather than historical cost.

D. SEC requires push down accounting for each substantially wholly-owned subsidiary.

Front 6

For which of the following reporting units is the preparation of combined financial statements most appropriate?

a. A corporation and a foreign subsidiary with nonintegrated homogeneous operations.

b. Several corporations w/ related operations owned by one individual.

c. Corporation and a majority-owned subsidiary w/ nonhomogeneous operations.

d. Several corporations w/ related operations w/ some common individual owners.

Back 6

Several corporations with related operations owned by one individual.

Front 7

Mr. Cord owns four corporations. Combined financial statements are being prepared for these corporations, which have intercompany loans of $200,000 and intercompany profits of $500,000. What amount of these intercompany loans and profits should be included in the combined financial statements?

Back 7

Loans, $0; profits, $0.

Rule: "Combined financial statements" do not eliminate "equity" accounts (they are all added across). However, all other intercompany "transactions" and "balances" are eliminated in combined financial statements just as they are in consolidated financial statements.

Front 8

Which of the following items should be treated in the same manner in both combined financial statements and consolidated statements? Different fiscal periods? Foreign operations?

Back 8

Different fiscal periods & foreign operations are treated in the same manner in both CFSs & consolidated statements.

CSFs are prepared in the same manner as consolidated financial statements except there is no parent company. Therefore, there is no investment in sub account to eliminate against sub equity accounts.