The analysis of changes in cash for a consolidated entity begins with the consolidated balance sheets. There are several issues that you should keep in mind when preparing a consolidated statement of cash flow, including cash acquisition of a controlling interest, noncash acquisition of a controlling interest, and adjustments resulting from a business combination.
Please respond to all of the following prompts in the class discussion section of your online course:
- In the context of the cash acquisition of a controlling interest form of business combination, how would you describe the difference between an investing activity and a financing activity? What is the importance of this distinction?
- From an accounting perspective related to adjustments resulting from business combinations, if you had to choose between purchasing subsidiary shares or intercompany bonds, which would you choose? Why?
- In the example of the process of preparing a consolidated statement of cash flows where there has been a business combination presented on page 331 of Advanced Accounting, which part did you find the most difficult? The most straight-forward?
- Assume you are working for the parent company of a group with five subsidiaries. Of the information presented, which do you think would be the most difficult to obtain? Explain.