The concept Accounting Entries for Acquisition of Subsidiary reflects that when a company ACQUIRES a subsidiary, it needs to account for the transaction properly in its financial statements. Proper accounting treatment for the acquisition of a subsidiary is essential as it provides stakeholders with a clear understanding of the financial position of the company.
Table of Contents
Accounting Entries for Acquisition of Subsidiary
The following are the Acquisition of Subsidiary Double Entry /(ies) that are REQUIRED :
1. Purchase Price
| Debit | Credit |
|---|---|
| Asset A/C | |
| Liability A/C |
2. Fair Value of Assets and Liabilities
| Debit | Credit |
|---|---|
| Asset A/C | |
| Liability A/C |
3. Goodwill
| Debit | Credit |
|---|---|
| Goodwill A/C | |
| Asset A/C |
4. Elimination of Inter-Company Transactions
| Debit | Credit |
|---|---|
| Inter-Company Transaction A/C | |
| Revenue or Expense A/C |
5. Minority Interest (NCI)
| Debit | Credit |
|---|---|
| NCI A/C | |
| Equity A/C |
6. Deferred Tax Liabilities and Assets
| Debit | Credit |
|---|---|
| Deferred Tax Asset or Liability A/C | |
| Equity A/C |
7. Gain or Loss on Disposal
| Debit | Credit |
|---|---|
| Investment in Subsidiary A/C | |
| Gain on Disposal A/C |
The Bottom Line
Accounting Entries for Acquisition of Subsidiary NEEDS to be recorded in the Parent Company’s financial statements. Proper accounting treatment ensures that stakeholders have a clear understanding of the financial position of the company.
(Qualified) Chartered Accountant – ICAP
Master of Commerce – HEC, Pakistan
Bachelor of Accounting (Honours) – AeU, Malaysia