Section 1: 30–40%1A6
Consolidated Financial Statements
Exam Insight
Consolidations is one of the most calculation-heavy topics in FAR - expect a sim that asks you to eliminate intercompany transactions and compute consolidated net income. The trap most candidates miss: even if Parent sold goods to Sub and Sub already sold them to outsiders, you still eliminate the original intercompany revenue and COGS. Also know the full goodwill method cold - AICPA tests NCI allocation constantly.
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What AICPA Wants You to Know
- 1Apply the consolidation requirement (control = >50% voting interest, or variable interest entity)
- 2Eliminate intercompany transactions: sales, loans, dividends
- 3Calculate noncontrolling interest (NCI) on the balance sheet and income statement
- 4Recognize goodwill on acquisition and subsequent impairment testing
- 5Distinguish consolidation from equity method and cost method