How should you capitalize an acquisition and report your balance sheet??

[Clement]

Oh yes equity method... I'm confused in midst of cranking my brain

Sorry to delve deeper but if A acquires 51% of B at $51 when book is $40 means they will OR can book $11 goodwill? And what happens when they increase their stake to say 75% for $24? Does the goodwill need to be reversed out or goodwill will increase further, or the additional goodwill of around $20 will be charged off PnL?

Thanks for the education... bit confusing to me.

The key economic event is acquisition or cessation of control.

When A acquires 51% of the voting rights of B. It acquires control of the assets and liabilities of B. Thus the $11 difference is goodwill.

The further acquisition does not change the actual control of the subsidiary. It is just an acquisition of further economic rights, therefore the difference is set off against reserves. There is no need to recompute goodwill for the transaction.