Method change

[Former Member]

A investted on B's 50% of stock in Jan 2006 and consolidates using purchase method.

Now A wants in Sept. 2008 A needs to consoldate B using 'Equity method' ( but no % change in ownership) which calls for method change.

Following is the question..

1.During method change do we have to reverse all the good will entries, subsequent consolidation entries from 2006 Or do we have to reverse only the Current year consolidation entries( such as GW amortization , CT difference).

2. After method change, does the system pass the 'Equity method' entries from retropective effects such as picking up Share of profit, writing of GW.

Appreciate the information..

Edited by: Gokul on Sep 24, 2008 8:02 PM

[dan_sullivan]

1. The system will automatically reverse these entries as needed with the method change occurs and COI is executed

2. After the method change, A's share of B's earnings is recognized from that period onward. Earlier periods are already recognized via the inclusion of B's earnings via purchase method. The virtual logic will include the correct items for reporting.