When preparing a set of consolidated financial statements, the pre-acquisition entry relates to:
A) both the parent and the NCI in the subsidiary;
B) only the investment by the parent in the subsidiary;
C) only the investment by the NCI in the subsidiary;
D) the total investment by the parent in the subsidiary plus the after tax effect of the investment by the NCI.

Question

Quizplus · Accepted Answer

The pre-acquisition entry in consolidated financial statements only relates to the investment by the parent in the subsidiary, which is the amount of consideration paid for acquiring the subsidiary. It represents the cost of the investment and forms the basis for subsequent accounting treatment of the subsidiary in the consolidated financial statements. The other options are incorrect as they either refer to the NCI or include the after tax effect, which is not considered in the pre-acquisition entry.

When Preparing a Set of Consolidated Financial Statements, the Pre-Acquisition