Consolidations of Financial Statements A. Based on research from your chosen com
ID: 2476282 • Letter: C
Question
Consolidations of Financial Statements
A. Based on research from your chosen company, explain the corporate structure in terms of consolidation. How is it organized from a consolidated viewpoint? What are the reasons for this particular type of organization?
B. How does the consolidation impact how the accounting information flows into the consolidated financial statement? Describe the process.
C. Are there any income tax benefits from consolidating the financial statements for your company? Defend your response.
chosen company is Netflix, Inc.
Explanation / Answer
EXPLANTATION:
A) Consolidated Corporate Structure:
Corporate structure inculdes different departments of the company which are worked for companies objective. these departments are finance, marketing , human resource department, production etc. Consolidated means combined. if company having more than two branches in its domestic country or in foreign country then Consolidated corporate structure includes departments of all subsidiareis of a company.
for an MNC companies corporate structure is very important because it operates its subsidiaries more than two countries. it can be organised with care because differences in culture , language, place ,political laws among subsidiaries.while preparing consolidated final statements like balance sheet., profit and loss account, etc of a parent company (MNC) , It confronted with different types of risks like exchange rate risk, tax rules, interest rate risks , inflation rate risks . all these must be considered.
changing the asset values in consolidates balances sheet with change of the currency is calles translation risk. it must be considered.chosen company is Netflix .Netflix is the world’s leading Internet television network with over 81 million members in over 190 countries enjoying more than 125 million hours of TV shows and movies per day, including original series, documentaries and feature films.
B.CONSOLIDATION IMPACT AND PROCEDURE:
Conlsolidation impact the accounting information of the parent company because of changing accounting practice and translation risk , economic risk and excahange risk.The following are the rules while preparing the consolidates balance sheet:
1)Consolidated should be made on line by line basis by adding together like items as sets, liabilities,income and expense.
2)All group balances and group transactions and unrealized profits arising thereon should eliminated
3)Dividend-minority share when paid is deducted from opening " minority Interest"
4)The investment in each subsidiary is replaced by the actual assets and liabilities of that subsidiary.
Consolidation adjustments are then made for any:
C). Income tax Benefits to the company from consolidated financial statements
In the same way netflix company get benefits from consolidated financial statements by adjusting profit to the low tax country and decrease profit to from high tariff countries. etc.