UNNES Laporan Keuangan Konsolidasi pada Akuisisi : Metode Ekuitas 2

Summary

This video tutorial explains the process of financial consolidation during acquisitions using the equity method, specifically when acquisitions occur mid-period. It covers the calculation of stock book values, adjusting retained earnings, and determining the post-acquisition financial statements. The example demonstrates how to consolidate financial data for a company that acquires another partway through the accounting period, including handling dividends and profit recognition. Practical steps are provided for journal entries, working papers, and financial reports, making complex accounting concepts accessible and actionable for those handling real-world mergers and acquisitions.

Takeaways

• 😀 The video continues from a previous one, explaining the impact of mid-period acquisitions on financial consolidation and the equity method in accounting.
• 😀 When an acquisition occurs mid-period, adjustments to retained earnings and stock value are necessary to reflect the financial position correctly at the time of the acquisition.
• 😀 If the acquisition happens at the beginning of an accounting period, no adjustments to retained earnings are needed, and it uses the prior year's retained earnings as the starting point.
• 😀 For acquisitions occurring in the middle of the year, a calculation of retained earnings up until the acquisition date is required, as the financial records may not yet reflect this in the usual consolidated statements.
• 😀 In practice, the calculation of profit or loss for the period and retained earnings will need to be prepared to reflect the acquisition date, but this step is theoretical in the context of exercises.
• 😀 A sample acquisition scenario is provided where a company acquires 8,000 shares in a smaller company at a specific price, and the smaller company has a net profit during the year, alongside a dividend declaration.
• 😀 Key steps in the acquisition process include journal entries for the acquisition date, financial consolidation worksheets, and journalizing dividend declarations and earnings recognition.
• 😀 For example, a journal entry for the purchase of shares involves debiting the investment in the smaller company and crediting cash for the total purchase cost.
• 😀 Upon the dividend declaration by the acquired company, the parent company recognizes its share of the dividend (calculated based on the percentage of ownership).
• 😀 The final steps in the process involve eliminating intercompany transactions in the consolidated financial statements, adjusting for retained earnings and investment balances, and calculating any differential purchase amounts based on acquisition prices above book value.

Q & A

What is the main focus of the video?

The video primarily focuses on how to handle financial consolidation during acquisitions using the equity method, particularly when the acquisition happens in the middle of the accounting period.

How does the timing of an acquisition impact stock book value calculations?

The timing of the acquisition affects the stock book value because it requires adjustments for retained earnings (saldo laba) and other financial components at the time of the acquisition. If the acquisition happens at the start of the period, no adjustment is needed, but if it's mid-year, an adjustment is required to account for profits or losses earned before the acquisition.

What happens if the acquisition occurs in the middle of the year? How do we calculate retained earnings?

If the acquisition occurs mid-year, the retained earnings must be recalculated up to the date of the acquisition. For example, if an acquisition occurs on April 1, the retained earnings from January 1 to March 31 must be calculated based on the financial data of the acquired company, which is typically done by taking a proportional share of the earnings from that period.

What journal entries are made when acquiring shares using the equity method?

The journal entry to record the acquisition of shares would debit the 'Investment in Subsidiary' account and credit the 'Cash' or 'Bank' account, with the amount being the purchase price of the shares. For example, buying 8,000 shares at Rp 35,000 each would result in a debit of Rp 280,000,000 to the 'Investment in Subsidiary' account.

How is dividend payment handled in the equity method?

Under the equity method, when dividends are paid by the subsidiary, the parent company records the receipt of dividends as a reduction in the 'Investment in Subsidiary' account. The journal entry would debit the 'Cash' account and credit the 'Investment in Subsidiary' account, reflecting the parent's share of the dividend.

What adjustments are needed in the consolidation process for an acquisition mid-period?

In consolidation, adjustments need to be made for the acquisition date’s effect on assets, liabilities, and income. For instance, the parent company must adjust its investment value to reflect the acquisition price and the fair value of acquired assets and liabilities. Any intercompany transactions and dividends must also be eliminated.

How is the differential purchase price (selisih pembelian) calculated?

The differential purchase price is calculated by subtracting the book value of the shares from the purchase price. This represents the difference between what the parent company paid for the subsidiary and the book value of the subsidiary’s equity at the acquisition date.

What is the role of retained earnings (saldo laba) in the equity method?

Retained earnings (saldo laba) play a critical role in the equity method as they contribute to the overall book value of the shares acquired. Any change in the subsidiary’s retained earnings after the acquisition is reflected in the parent company’s investment in the subsidiary.

How are profits or losses recognized after the acquisition in the equity method?

After the acquisition, profits or losses from the subsidiary are recognized by the parent company proportionally based on its ownership percentage. For example, if the parent owns 80% of the subsidiary, it will recognize 80% of the subsidiary’s profits or losses in its financial statements.

What is the process for preparing consolidated financial statements after an acquisition?

To prepare consolidated financial statements, the parent company must combine its financial results with the subsidiary’s, making adjustments for the acquisition price, retained earnings, and intercompany transactions. Elimination entries are also made to remove any intra-group transactions or balances, ensuring that the consolidated financial statement reflects the overall financial position of the group as a whole.