In parent company financial statements, investments in consolidated subsidiaries are presented as investments using the parent’s proportionate share of the investee or subsidiary.
A parent company’s investment in a noncontrolled entity is accounted for on the same basis applied in preparing the consolidated financial statements. Therefore, investments measured at fair value or accounted for using the equity method should be accounted for in a similar manner in the parent company financial statements. As a result, the carrying amount of an investment is the same in both the consolidated and parent company financial statements.
In consolidated financial statements, the net carrying amount of a subsidiary attributable to the parent equals the carrying amounts of the subsidiary’s assets and liabilities measured using the parent’s basis less any noncontrolling interest. In parent company financial statements, the net carrying amount of a subsidiary attributable to the parent should equal the amount reported in the parent company’s balance sheet as its investment in the underlying net assets of the subsidiary measured using the parent’s basis less any noncontrolling interest. In addition, total stockholders’ equity, net income and comprehensive income amounts presented in the parent company financial statements should equal the corresponding amounts attributable to the parent in the consolidated financial statements.
Although the presentation of consolidated subsidiaries in parent company financial statements is similar to the equity method guidance prescribed by ASC 323, Investments—Equity Method and Joint Ventures, it may not yield the same result because certain items are handled differently under ASC 323 than they are in consolidation. In other words, recording subsidiaries at the net amount attributable to the parent does not always result in presentation of the parent company’s investment as if the consolidated subsidiary were accounted for under the equity method.
Figure FSP 31-2 outlines selected differences in subsidiary presentation in parent company financial statements versus the equity method of accounting.
Figure FSP 31-2
Selected differences in subsidiary presentation in parent company financial statements versus the equity method of accounting