Indirect and Mutual Holdings :
- Prepare consolidated statements when the parent company controls trough indirect holdings.
- Apply consolidation procedures of indirect holdings to the special case of mutual holdings.
The indirect holding system (also multi-tiered holding system) is a system of securities clearance, settlement and ownership system where ownership information is held electronically as a book entry. It consists of one or more tiers of intermediaries between issuer and investor.
Types of Indirect
Parent owns 80% of A, and through A, 60% of B (80% x 75%).
Equity Method for Father-Son-Grandson Holdings
- Son applies equity method for Investment in Grandson.
- Father applies equity method for Investment in Son.
- Controlling interest share of consolidated income includes :
– Share for direct holding of son.
– Share for indirect holding of grandson (by father through son).
- Connecting Affiliates
Parent owns 80% of A, 25% of B, and through A an additional 32% of B (80% x 40%). Parent owns a total of 57% of B.
Indirect Holdings with Connecting Affiliates
Indirect holdings with connecting affiliates:
- Handle similar to Father-Son-Grandson, but
- Father has direct holdings in both Son and Grandson
- Advanced Accounting, 10th edition by Floyd A. Beams, Robin P. Clement, Joseph H. Anthony, and Suzanne Lowensohn.