Surplus at date of acquisition;

              ATLANTA PORTLAND
BALTIMORE
BIRMINGHAM
BOSTON HASKINS & S E L LS PROVIDENCE
SAINT LOUIS
SALT LAKE CITY
CBHUAFFRALLOOT TE SAN DIEGO
CHICAGO CERTIFIED PUBLIC ACCOUNTANTS SAN FRANCISCO
SEATTLE
CINCINNATI TULSA
CLEVELAND WATERTOWN
DALLAS BULLETIN DENVER DETROIT BERLIN
JACKSONVILLE LONDON
KANSAS CITY MANILA
LOS ANGELES PARIS
MINNEAPOLIS SHANGHAI
NEWARK
NNEEWW OYORLREKA NS 1E5X BERCOAUDT SIVTREE ETO. FNEFWIC YEOSR K HAVANA
PHILADELPHIA MEXICO CITY
PITTSBURGH MONTREAL
VOL. XI NEW YORK, JULY, 1928 No. 7
Surplus at Date of Acquisition
Introduction
THREE very interesting articles on this
subject have been written by members
of the organization. The articles are repro­duced
herewith. Each author deals with
the subject differently, and together the
articles bring out practically all of the
various aspects of the subject.
It is not the intention to discuss the sub­ject
here in a way that will detract from the
dissertations themselves but rather to
state the principal situations which give rise
to controversy. They are as follows:
(a) Where the cost to the holding com­pany
is equal to the par value, or
stated value, of the capital stock and
surplus of the subsidiary company,
and the balance sheets of the two
companies are to be consolidated;
shall the excess of cost over par be
eliminated against surplus, or may
the excess be shown as an asset, and
the surplus be allowed to remain as
such in the consolidated balance
sheet?
(b) Where the cost to the holding com­pany
is in excess of the aggregate of
par, or stated value, and surplus of
the subsidiary; shall the excess of
cost over par be shown as an impair­ment
of capital, or eliminated against
the surplus of any other companies
in the consolidation, or may the ex­cess
be shown as an asset, described
as what it is, or described as good­will?
(c) Where the cost to the holding com­pany
is less than the aggregate of
par, or stated value, and surplus of
the subsidiary; may the excess be
permitted to stand in the consoli­dated
balance sheet as surplus avail­able
for dividend declarations, or
must the excess be shown as capital
surplus?
ARTICLE No. 1
By R. A. GALLAGHER, Chicago Office
The subject of surplus at date of ac­quisition
is incidental to the subject of
consolidated balance sheets. The purpose
of a consolidated balance sheet is to show
the position of the holding company in its
relation to the general public, which is
brought about by substituting the assets
and liabilities of the subsidiary company
for the investment in the capital stock of
that subsidiary company
Each item appearing in a consolidated
balance sheet should be shown in a manner
which will portray that item in its true rela­tion
to the general public. Accordingly,
in giving consideration to surplus at date