ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Alpha acquires 70% of the equity shares of Beta, which carry one vote each. Which of the following statements about the consolidated statement of financial position is correct?
Beta's assets and liabilities are included in full, line by line, because Alpha controls it. The 30% of net assets belonging to other shareholders is shown as a non-controlling interest within equity. Proportionate inclusion at 70% is not permitted for subsidiaries.
- ABeta's assets and liabilities are included at 70% of their values
- BBeta's assets and liabilities are included in full, with a non-controlling interest shown in equityCorrect
- CBeta is included as a single line, 'investment in associate'
- DOnly Beta's net assets are shown, as one line
Explanation
Consolidation uses the full (line-by-line) method: 100% of the subsidiary's assets and liabilities are added to the parent's, and the 30% not owned is shown as a non-controlling interest within equity. Including 70% only is proportionate consolidation, which is not used for subsidiaries.
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