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 essentialas it provides stakeholders with a clear understanding of the financial position of the company.
The following are the Acquisition of SubsidiaryDouble 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.
