Hi Hi

when a parent (p) acquires a subsidiary(80 %), then a subsidiary (s) acquires a sub-susidiary(ss) (60%)
and then a parent acquires SS for (32%)

When calculating minority, we do the following:


Add: Net Asset of S x 20%
Less: Investment in SS from S x 20%


Add Net Asset of S x 20%.

But I do not know why we need to do "Less: Investment in SS from S x 20%"

What is the reason behind it?

Thank you.

This is very simple concept.

If parent 'P' holds investment of $1,000 in 'S' then we knock off this element with the Shares acquired(means we neither take investment in subsidiary nor we take share capital of Subsidiary in consolidated accounts).

The similar concept applies in the situation where subsidiary(S) owns its subsidiary(SS) which provides the parent Indirect control on SUB-SUBDIARY(SS). So, parent holds S(directly) and SS(Indirectly) and thus the NET ASSETS of S(immediate Subsidiary) contains the investment of $XX in Sub-Subsidiary(SS) and our basic consolidation concepts say that we need to knock off the investment in subsidiary with its share capital this is the reason why we do not take or less the investment in sub-subdiary from the net assets of Immediate-Subsidiary.

Hope that helps!

Regards,

Muhammad Amir.

I see. Yes, it helps. Thank you