Sub-consolidation

Sub-consolidation

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Three entities. JV, parent(P) and ultimate parent (U).

The JV is owned 50% by the parent which in turn is owned 100% by the ultimate parent. How is the JV reflect in the Ultimate parent books? In U should we show the share of the JV's gross assets and share of gross liabilities (gross equity style) or because the JV should have been gross equity acounted for in P when we consolidate P the assets and liabilities of the JV get rolled up into those of the group and not seperately shown? Is this covered in any standard. 

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By Democratus
26th Sep 2013 09:24

FRS 9

Not sure what standards your co is preparing from but FRS9 is/was the definitive std.

IMHO the U should still show share Gross asset / Gross liability.

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By zelizeli
26th Sep 2013 10:59

Thanks Democratus. To my mind it is more meaningful to show share of gross assets etc, but I'm not sure it's the correct treatment. The P will gross equity account for JV, and then the assets of the parent get "absorbed" into the group at the ultimate holding company level when P is consolidated to U. In which case the JV  share then disappears at the U group level (?).

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By Democratus
27th Sep 2013 16:55

Sorry just getting back

 

I'm no expert and have followed the advice we are offered by our Auditors - (one of the biggies).

I think it. the reader of the overall holding Co has to be aware that JVs are included in the balance sheet so netting out destroys the visibility. Para 21

Edit - can't get this to fit - hope it's legible

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By zelizeli
30th Sep 2013 10:20

Good reply Democratus. One of

Good reply Democratus. One of the big 4 audit firms has told me the same. Whilst I agree it gives greater visibility to the reader of the accounts, I'm by no means convinced it is correct as the gross equity accounting must take place at P level, and then full consolidation at U of P. In which case visibility of the JV should only be at P level with the specific reference to the JV disappearing at U level. This treatment (of JV dissapearance at U level) makes sense to me as the alternative to gross equity account at U level would mean the JV has not been accounted for correctly at P level? Thanks Z.

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