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Adjusting entries consolidating statements

For consolidation, the fair value of each of these intangibles is recorded by the parent as an asset but only if contractual or other legal rights have been gained or if the intangible can be separated and sold.This guideline serves as a minimum standard for recognition of intangible assets in a corporate takeover: Patents, copyrights, trademarks, and franchises clearly meet the first of these criteria.

If the parent does not actively participate in the subsidiary’s operating, investing, and financing activities, the subsidiary is self-sustaining.When preparing consolidated financial statements that include a foreign subsidiary, the financial statements of the foreign subsidiary need to be translated into the reporting currency of the parent.There are two methods for currency translation, the current-rate method and the temporal method.Before financial statements are prepared, additional journal entries, called adjusting entries, are made to ensure that the company's financial records adhere to the revenue recognition and matching principles.Adjusting entries are necessary because a single transaction may affect revenues or expenses in more than one accounting period and also because all transactions have not necessarily been documented during the period.Question: When one company buys another, the subsidiary is often holding rights to numerous intangibles.

As mentioned, acquisitions often take place to gain those rights.

They have probably purchased many of them by acquiring entire companies. What rules must be satisfied for an acquiring company to record an intangible (previously owned by an acquired company) as an asset?

A new subsidiary could very well have hundreds of intangibles: patents, copyrights, databases, smart employees, loyal customers, logos, and the like.

In addition, your financial statements are built from the general ledger.

For each account title shown on your sales and cash receipts journal columns and your cash disbursements journal columns, there is a general ledger account.

The temporal method is used to translate integrated operations and the current-rate method is used to translate self-sustaining operations.