Presenter:
Christie W. Johnson, Montana State University—Bozeman

Description:
The study of consolidated financial statements (CFS) is complex and challenging, yet few textbook assignments require in-depth analysis. This multi-stage project requires students to integrate and apply their knowledge in a comprehensive manner.

To complete this project, students must integrate the major concepts pertaining to parent/subsidiary relationships, apply concepts learned in previous courses, and understand the impact of FASB proposals. Students also must demonstrate competency in documenting each stage of the analysis in a professional manner, mirroring practice expectations.

Key features include:

• First, students must determine acquisition, purchase price allocation and income adjustments, and develop CFS working papers for the third year after acquisition.
• Second, after feedback is provided, students must integrate intercompany transactions in inventory, plant assets, and bonds.
• In succeeding steps, students apply concepts to different and more complex situations. They are forced to draw on concepts from prior courses.
• Next, other variations and issues are introduced, including "cost" versus "equity" method, "parent" versus "entity" theory, bargain purchase (current versus proposed standards), impairment of long-lived assets and goodwill, and evaluating profitability (including comparing purchase versus "old" pooling results).
• Students find the project challenging, but indicate they develop an in-depth understanding of CFS.

Back to Wednesday Effective Learning Strategies Sessions