Consolidated net income is the sum of net income of the parent company excluding any income from subsidiaries recognized in its individual financial statements plus net income of its subsidiaries determined after excluding unrealized gain in inventories, income from intra-group transactions, etc.
Non-controlling interest is a component of shareholders equity as reported on a consolidated balance sheet which represents the ownership interest of shareholders other than the parent of the subsidiary. Non-controlling interest is also called minority interest.
In consolidation, purchase consideration is the cash or stock, or other assets transferred by the acquirer to the acquiree or its shareholders in return of the acquiree’s assets or its stock.
Purchase price allocation is the process through which purchase consideration paid in a business combination is allocated between the assets of the acquiree and goodwill, if any.
Consolidation worksheet is a tool used to prepare consolidated financial statements of a parent and its subsidiaries. It shows the individual book values of both companies, the necessary adjustments and eliminations and the final consolidated values.
Liquidating dividends are dividends paid in excess of a company’s accumulated earnings. They are meant to fully or partially liquidate the company. In accounting, they are not recognized as income by the investor but as a reduction of the investment carrying value.
Goodwill impairment is when the carrying value of goodwill exceeds its fair value. Goodwill is tested for impairment at least annually and the amount by which its carrying value exceeds its fair value is charged to income statement as an expense.
In business combinations, bargain purchase occurs when the fair value of net assets of the acquiree exceeds the consideration paid by the acquirer plus fair value of any non-controlling interest. The difference is recognized as a gain by the acquirer. It is also called negative goodwill.
Contingent consideration is the amount of consideration to be paid by an acquirer to the acquiree in a business combination which is dependent on some future event such as financial performance of the acquiree. It is recognized as either equity or liability.
When a bond is issued at a price higher than its par value, the difference is called bond premium. The bond premium must be amortized over the life of the bond using the effective interest method or straight-line method.