Notes: Consolidated Balances GAAP rules
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[Because the CRTC requires a Canadian has voting control, this means minority owned companies are consolidated 100 percent into the controlling company's balance sheet, does not seem right. Canada's GAAP accounting rule and consolidated balance sheets based on voting control, combined with the CRTC voting rules, are a disaster for equity and debt declarations for Canada's public companies. Basically Shaw buying 20 percent of Canwest, yet controlling 80 percent of the vote, has to declare all of Canwest debt on Shaws books, does not seem right. Note, currently Ottawa is debating ownership rules, need to work on reforming GAAP to fix this consolidated balance sheet error !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!]
http://faculty.babson.edu/halsey/acc7500/Off%20balance-sheet%20financing%20-%20transferring%20risk.pdf
2. Non-consolidated subsidiaries: A parent company need not consolidate a subsidiary which is less than 50%-owned and is not subject to the control of the parent company. In this case, the parent company includes the investment in the non-consolidated subsidiary in one line item on the balance sheet (investments). In this way, any debt of the subsidiary is excluded from the liabilities shown in the parent company’s balance sheet. Additionally, only the parent company’s share of the income or loss of the subsidiary is included in the consolidated income statement of the parent, and it is reported separately as one line (equity in income of nonconsolidated subsidiaries). Details regarding the components of the income or loss are excluded from the face of the consolidated income statement of the parent company.
http://www.rotman.utoronto.ca/karen.benzacar/web%20page%20mgt426/Lecture%20notes/Chapter%204%20KB.ppt#347,55,Introduction GAAP and IFRS rules are that the equity of Goldman Sachs must be displayed on Canweest's balance sheet. Canwest balance sheet is absent this required minority ownership equity equation in both the balance sheet and the foot notes.
Quote, "Situations with ownership of more than 20% but less than 50% need to be evaluated on an individual basis to determine if there are additional features sufficient to demonstrate "significant influence" for GAAP accounting purposes. So for GAAP accounting purposes there are two kinds of subsidiaries, majority owned and less than majority owned but where there is significant influence. "
Exeption to rule, for insurance industry. Quote. "Statutory Accounting Principles (SAP) applicable to US insurance companies . For SAP accounting purposes, consolidated ownership is also used, but because entities are not consolidated the term affiliate comes into play when more than one company holds equity interests in an entity that is 10% or more owned by the consolidated group. "
"In GAAP accounting, wholly owned and majority owned subsidiaries are usually consolidated with the parent. However, when they are not consolidated, as in financial statements for the parent company only, the GAAP equity method of accounting for subsidiaries is used. The GAAP equity method of accounting is also used for entities that are less than majority owned where there is "significant influence". Under the GAAP equity method of accounting, the parent company `s financial statements incorporate the parent's equity in the net income, unrealized gains or losses, and any other changes in net worth of the subsidiary, and the parent's equity in the net worth of the subsidiary is carried in the assets of the parent. "
http://findarticles.com/p/articles/mi_6776/is_5_8/ai_n31128511/
Quote, "The Financial Accounting Standards Board issued Statement No. 160 to revise the accounting standards for consolidated financial statements in December 2007. One of the major changes is the establishment of a single and conceptually sound method to account for changes in a parent's ownership interest in a subsidiary that do not result in the parent's loss of controlling interest in the subsidiary. These changes are now all accounted for as equity transactions and, therefore, no gain or loss will be recognized on the consolidation income statement. The only situation that results in gain or loss recognition is when the parent loses its control over its subsidiary. In that case, deconsolidation takes place and gain or loss may result. These provisions are consistent with the requirement under FASB Statement No. 160 that noncontrolling interest in a subsidiary be classified as equity. This paper investigates and presents examples to illustrate these changes."
http://wiki.ifrs.com/Consolidated-and-Separate-Financial-Statements
http://www.thefreelibrary.com/Toward+global+standards+on+consolidation+and+recognition.-a0207841893
