Company A acquried 100% of shares in company B for £30,000. Assets and liabilities of "B" on final day pre-acquisition were :
P&L reservers £34,995
Share Capital £5
Negative goodwill is included in balance sheet upon consolidation of £5,000, P&L reserves and share capital are eliminated.
Shortly after acquisition, subsidiary "B" capitalised £1,995 of p&l reserves to increase share capital to £2,000.
What is the accounting treatment on consolidation of the £1,995 capitalised reserves?
Jason Evans
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But it doesn't
The goodwill, negative or positive, is the difference between the price paid and the net asset value of the subsidiary. Transferring value between reserves and share capital does not change this at all.
Please explain why you think this matters.
Thanks, but....
Ah, but if the £1,995 has to be added to the negative goodwill it does make a difference!
Nothing
Since both capital and reserves are eliminated on consolidation it makes no difference.