When shares are issued by a parent company as consideration for the acquisition of a wholly owned subsidiary, the parent's EPS figures will always decline in the short term.This is because the subsidiary's earnings will only be added to the parent's earnings in the following period.

Question

Quizplus · Accepted Answer

When a parent company issues shares to acquire a wholly owned subsidiary, the subsidiary's earnings are consolidated with the parent's earnings immediately, not in the following period, which can mitigate or even prevent a decline in EPS.

When Shares Are Issued by a Parent Company as Consideration