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Laya Frankel Nov 21 8:27pm | Last reply Nov 22 7:41am To: VP From: Laya Frankel, Controller Date: November 21, 2024 Subject: Consolidated Financial Statements Dear VP, While all sets of books are being accurately recorded, we are unable to simply combine the reports. Because accounts exist to reflect the investments in the subsidiary companies, simply combining the reports would result in double counting. Therefore, we need to comply with GAAP standards and make adjustments before we can prepare the final consolidated reports. These are some of the adjustments that need to be done: According to 810-10-45-1, all intra-entity balances and transactions need to be removed. These include Investment accounts for the parent company and the shareholders' equity portion of the subsidiary reports. The subsidiary's assets will be adjusted to fair value instead of leaving it at book value. Depending on the situation there may also need to have an adjustment for goodwill. These adjustments follow FASB. There are differences comparing GAAP to IFRS. One big difference is in the way Goodwill is tested and recorded. IFRS emphasizes cash generating units and this results in increased likelihood that impairments may be identified. The concept of value used could also result in lower impairment losses under IFRS