Far 3 Marketable Securities And Business Combinations

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Eliminate

• The effects of intercompany dividends
• Parent's investment in sub account.
  
• The entire stockholder's equity section of the sub.
  
• The effects of the gain of loss and adjust for the excess depreciation on the sale of property, plant and equipment between affiliates.
  
• All intercompany sales and purchases.
  
• All other intercompany balance sheet and income statement accounts.
  
• Intercompany profit is cost of goods sold, and in beginnning and ending inventories relating to an intercompany sale of merchandise btween affiliates.
  

Adjust.

• Recognize noncontrolling interest.
• Adjust the balance sheet of the sub to fair value. Establish goodwill.
  

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Reports assets and liabilities at fair value in separate financial statements of subsidiary. In effect, consolidation adjustments are "pushed down" into the records.

• Assets and liabilities are adjusted to fair market value at date of acquisition.
  
• Retained earnings of the subsidiary are transferred to paid-in capital.
  
• Net income of each subsidiary includes depreciation, amortization, and interest expense based on fair values rather than historical cost.
  
• The SEC requires push down accounting for each "substantially wholly owned subsidiary."