Consolidating balance sheets accounting Cam chat for locals
Let’s look at the format to get a better understanding of it – source: Amazon SEC Filings If we total “shareholders’ equity” and “total liabilities”, we will get the similar balance we ascertained under “total assets”.
If “total assets” and “total liabilities shareholders’ equity” don’t match, there’s an error somehow in any financial statement.
Balance Sheet vs Consolidated Balance Sheet – There’s a subtle difference between the balance sheet and consolidated balance sheet. The balance sheet is prepared by all companies since it is one major financial statement.
Consolidated balance sheet isn’t prepared by all companies; rather companies who have shares in other companies (subsidiaries) prepare a consolidated balance sheet.
Here are the items we will consider under “current assets” – Have a look at the example of Amazon’s current assets – source: Amazon SEC Filings Non-currents assets are assets which pay off more than a year and these assets can’t be liquidated in cash easily. After “current assets”, we will include “non-current assets”.
Current assets are assets which can be quickly liquidated into cash.
An oil company is likely far more valuable than its drilling and pumping gear.
Consider the value of a brand name that may not be on the books but has instead been established by years of marketing.
Whenever one business buys another, and pays more than the fair value of all the identifiable pieces, the excess is termed "goodwill." This has always struck me as an odd term - but I suppose it is easier to attach this odd name, in lieu of using a more descriptive account title like: Excess of Purchase Price Over Fair Value of Identifiable Assets Acquired in a Purchase Business Combination.
So, when you see Goodwill in the corporate accounts, you now know what it means.
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Second, the assets acquired from Sledge, including goodwill, have been pulled into the consolidated balance sheet at the price paid for them (for example, take special note of the calculations relating to the Land account).