UNNES Laporan Keuangan Konsolidasi pada Akuisisi Metode Biaya Perolehan 3

Summary

This video provides a comprehensive explanation of financial consolidation during acquisitions, focusing on the cost method and its comparison with the equity method. The presenter, Muhammad Hafid, walks through the key steps, including journal entries for the initial acquisition, the recognition of profits and losses, and dividend payments. He emphasizes the difference between the two methods, particularly how investments are adjusted under the equity method versus the cost method. Using a practical example, the video showcases how these accounting treatments impact financial statements, making complex concepts easier to understand for accounting students and professionals.

Takeaways

• 😀 The script discusses the consolidation of financial statements, focusing on the acquisition process using the cost method.
• 😀 The cost method for acquisitions involves recording investments at the acquisition cost without adjustments for changes in the subsidiary’s performance.
• 😀 The equity method, discussed in a previous video, adjusts the investment account based on the subsidiary's profits, losses, and dividends.
• 😀 The initial accounting entry for an acquisition is the purchase of shares at cost, recorded in the parent company's investment account.
• 😀 After one accounting period, the parent company can use either the equity method or the cost method to account for the investment.
• 😀 The equity method requires continuous adjustment of the investment account, while the cost method keeps the investment constant at the acquisition cost.
• 😀 A comparison between the two methods highlights that in the cost method, dividends are recorded as income, while in the equity method, they reduce the investment value.
• 😀 The script provides a detailed example involving an acquisition by PT Besar of PT Kecil and the necessary accounting entries and adjustments using the cost method.
• 😀 Key differences between the equity method and the cost method are illustrated through journal entries for profit recognition, loss adjustments, and dividend distributions.
• 😀 A step-by-step explanation is given for creating consolidated financial statements, including the elimination of reciprocal accounts between the parent and subsidiary companies.

Q & A

What is the main focus of the video discussed in the transcript?

The video primarily focuses on explaining the consolidation of financial statements after an acquisition, specifically using the **cost method** of accounting and comparing it with the **equity method**.

What happens when a parent company purchases shares of a subsidiary company?

When a parent company purchases shares in a subsidiary, it records the initial investment at the cost of acquisition, which includes the price of the shares and any associated costs, such as commissions and fees.

How does the equity method differ from the cost method in terms of investment accounting?

Under the **equity method**, the parent company adjusts the investment account based on the subsidiary's profit, loss, and dividend distributions. In contrast, the **cost method** keeps the investment at the initial cost, with no adjustments for the subsidiary's financial performance after the acquisition.

What is meant by 'differential' in the context of an acquisition?

The 'differential' refers to the difference between the acquisition cost of the subsidiary and the book value of the subsidiary’s net assets at the time of acquisition. This difference is recorded as an adjustment in the financial statements.

How does the parent company recognize dividend income under the cost method?

Under the cost method, dividend income is recognized as income when the subsidiary distributes dividends, but the investment account remains unchanged. The dividends are treated as income and not as an adjustment to the investment account.

What journal entries are made when a parent company acquires shares in a subsidiary?

At the time of acquisition, the journal entry typically involves debiting the investment in the subsidiary account and crediting the cash account, based on the total purchase cost of the shares.

How does the cost method affect the parent company's financial statements after the acquisition?

Under the cost method, the investment in the subsidiary is recorded at the acquisition cost and does not fluctuate with the subsidiary's profits, losses, or dividend distributions. The parent company’s financial statements will not show direct adjustments to the investment account based on the subsidiary's financial performance.

What is the significance of 'elimination entries' in consolidated financial statements?

Elimination entries are made to remove intercompany transactions and balances between the parent and subsidiary companies, such as investment accounts, capital stock, and retained earnings, to avoid double-counting and ensure accurate consolidated financial statements.

In the example provided, how does the parent company treat the subsidiary’s profit and dividend payments?

In the cost method, the parent company does not adjust the investment account based on the subsidiary’s profit or loss. However, it recognizes any dividend income received from the subsidiary as income, not affecting the investment account.

What is the primary challenge of using the cost method in comparison to the equity method?

The primary challenge of using the cost method is that it does not reflect the actual performance of the subsidiary in the parent company's financial statements. Unlike the equity method, which adjusts for the subsidiary's profits, losses, and dividends, the cost method maintains the investment at its original cost, which may not accurately reflect the value of the investment over time.