Guys, I have a couple of questions regarding M&A and I was wondering if you guys have any insights to this.
Suppose Company X acquires 10% of Company Y - how is this reflected in the financial statements of Company X?
What if Company X acquires 40% of Company Y instead?
I know that in cases where Company X acquires >50% of Company Y we go into minority interest, but what if it is less?
Thanks!!
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Google > CFA Level 2 Financial Reporting & Analysis > Intercorporate Investments (this is an example: http://takloo.wordpress.com/2011/02/13/how-to-account-for-intercorporat…)
The accounting method used depends primarily on the degree of control/influence and level of ownership.
If it's less than 50%, the income is not consolidated in the Company's financials and is reflected in the equity income line.
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