Case Study Question: Please provide facts, issues, conclusion, and authorities &

Question

Case Study Question: Please provide facts, issues, conclusion, and authorities & application.

The Bootsie Holding Company has sales exceeding $10 billion and each of its three, wholly-owned subsidiaries has sales exceeding $2 billion. Three years ago, the subsidiaries had “complex” capital structures—until Bootsie acquired them. Bootsie’s annual report shows its consolidated income and individual income statement accounts of each subsidiary company. Should Bootsie also report separate earnings-per-share balances for the three subsidiary companies?

Explanation / Answer

The holding company should present the consolidated financial statements including the details of the wholly-owned subsidiaries. The consolidated financial statements include the consolidated income statement, consolidated balance sheet and consolidated statement of cash flows. However, the consolidated statement of income should clearly mention the details of the net income from of the consolidated entity and the EPS of the consolidated entity.

However, in the present case, the company has net sales exceeding $10 billion and the three subsidiaries having net sales exceeding $2 billion each. Since, they are wholly owned subsidiaries, the sales will be considered as the sales of holding company.

Hence, there is no need to report the earnings per share balances for the three-subsidiaries separately in the consolidated financial statements of the holding company.

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