Abstract
This chapter describes the concepts of consolidation in the EEC. The difference between proportional consolidation and equity consolidation is that under the latter, the investment is shown as one item, while under the former, the same amount in total is distributed over the relevant assets and liabilities. The definition of net assets under the proprietary concept may or may not include goodwill on consolidation. Current practice in the United Kingdom is a compound of the parent company concept for subsidiaries and the equity method for associated companies. The entity concept intrudes slightly in that inter-company profits are sometimes eliminated 100%, even where there is a minority interest, but this is probably the result of conservatism and a desire for simplicity. Methods of treating intercompany profits are seldom disclosed in publishing company accounts, so it is difficult to be certain about the usual practice is. Most companies still use historic values, but a changeover to current values is on the way.
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