Question
Holding Ltd. owns 80% shares of Subsidiary Ltd. As on
the date of consolidation, the subsidiary has reserves of ₹5 lakh, including ₹2 lakh earned before acquisition. What amount of reserves will be shown in the consolidated balance sheet?Solution
Only post-acquisition reserves are considered in consolidation attributable to the parent company’s shareholding. So, 80% of ₹3 lakh (post-acquisition reserves) = ₹2.4 lakh will be added. Also, 20% of ₹5 lakh = ₹1 lakh is attributed to minority interest. So total shown is ₹3.4 lakh (rounded down to ₹3 lakh in simplified answer).
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