USA Consolidating after equity method discontinued

[richardk_73]

After reading multiple guidance sources, I am still not clear how to properly consolidate a subsidiary with a negative equity balance.

When using the equity method, once an investment balance in a subsidiary hits zero (share of losses = carrying amt.), accounting for the investment by the parent company by use of the equity method ceases --as per APB 18-19.

Henceforth, how do I eliminate this 'unaccounted' share of losses by the parent from the sub's equity section?

Perhaps they do not get eliminated? Can anyone please confirm/help?

Thanks

 

[bklynboy]

You are correct losses are suspended when negative and tracked offline against future gains until it becomes positive. However this applies solely when you use equity method accounting to record your share of the subsidary. If you have control and need to consolidate this guidance does not apply. You consolidate all the balances. For example, if you 100% own a subsidiary and it has a deficit pick up everything. If its a 30% owned subsidiary you use equity method to record your share but cap at 0.