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Differentiate between full consolidation and equity method of accounting for subsidiaries and associate companies

      

Differentiate between full consolidation and equity method of accounting for subsidiaries and associate companies

  

Answers


Wilfred
1. Full consolidation
The main reason for consolidating a subsidiary is because the subsidiary’s assets are controlled by the holding company and meanwhile, the holding company is also liable to the subsidiary’s liability. The substance is that the assets and liabilities of a subsidiary belongs to the holding company.

2. Equity method
The investor is able to influence but not control the associate company therefore, it is not proper to report the associate as a mere investments nor consolidate and hence the use of equity method
Wilfykil answered the question on February 12, 2019 at 08:43


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