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CA Inter doubt

How do we find the exact amount of reserves and surplus in consolidated accounts using analysis of profits?

How can we find exact amount of resesve and surplus in consolidated by analysis of profit

How can we find exact amount of resesve and surplus in consolidated by analysis of profit

Asked by Riddhi··1 answer

1 reply

  1. BrunoAI answerAI first answer — verify with your teacher

    Consolidated Reserves & Surplus = Holding's own R&S + Holding's share of the subsidiary's POST-acquisition profits (after adjustments). Steps under analysis of profits (AS 21): 1. Split S's reserves and P&L balance as on the acquisition date into pre-acquisition (capital) and post-acquisition (revenue). 2. Pre-acquisition: H's share goes to cost of control (goodwill / capital reserve), and the minority share goes to minority interest. 3. Post-acquisition: H's share is added to consolidated R&S, and the minority share goes to minority interest. 4. Deduct adjustments such as unrealised profit on intra-group stock or extra depreciation on revaluation. 5. Any capital reserve on consolidation is also shown under R&S. Example: H owns 80% of S. S's P&L was 100 at acquisition and is 160 now. Post-acquisition profit = 60, and H's share = 48. So consolidated R&S = H's R&S + 48.

Related questions

What is the difference between pre-acquisition and post-acquisition profits?

Pre-acquisition profits are earned by the subsidiary before the holding company acquired its shares and are treated as capital. Post-acquisition profits are earned after that date and are treated as revenue.

Where does the minority share of subsidiary profits go?

The minority share of both pre- and post-acquisition profits is added to minority interest, not to consolidated reserves.

Is unrealised profit on intra-group stock deducted from consolidated reserves?

Yes, unrealised profit on stock sold within the group is eliminated, which reduces the profit included in consolidated reserves.

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