I/G investments and dividends- This can be broken down into two scenarios. The first being dividends from pre-acquisition earnings of S and the second being dividends from post-acquisition earnings of S

The general elimination entries (to avoid double-counting) are

Dr Dividend Income (of P, from S) x
Cr Dividend distribution (of S) x

Dr Dividend payable (of S) x
Cr Dividend Receivable (of P) x

Dividends from post acquisition earnings of S- Method I would take would be to prepare journal entries that would have appeared in the separate accounts of Company A and Company B and then from those do the elimination entires. This will help with the worksheet. Don't forget to do consolidation entry to eliminate investment in Company B. page 923
Dividends from Pre-acq earnings of S- The payment of a dividend by a subsidiary is treated as an indication that the parent's investment in a subsidiary may be impaired, if
i. the carrying amount of the investment in the separate financial statements exceeds the carrying amounts in the consolidated financial statements of the investee's net assets, including associated goodwill
ii. the dividend exceeds the total comprehensive income of the subsidiary, jointly controlled entity or associate in the period the dividend is declared. Investment in subsidiary in parents own accounts must be written down to its recoverable amount by recognising an impairment loss expense

Dr Impairment loss- Investment in Subsidiary
Cr Accumulated impairment loss- Investment in Subsidiary

However, upon consolidation, the impairment losses relating to the paren't investment in the subsidiary would be reinstated to both the Investment in Subsidiary account and to the subsidiary's equity by virture of the following entires
Dr Accumulated Impairment loss- Investment in Subsidiary
Cr Impairment loss-Investment in Subsidiary This acts to restore the investment in sub account back to original purchase price paid by parent and adjusts equity of sub to include entire equity of sub at acquisition

	Created by Nafisa Zahra almost 11 years ago

University Company Accounting (Intragroup Transactions and Balances) Note on Untitled_3, created by Nafisa Zahra on 04/10/2013.