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Account solution

Cross shareholdings, where two or more companies own shares in each other, result in each of the companies indirectly owning part of their own share capital.

A new “Research Bulletin" just published by the New Zealand Society of Accountants suggests a method for resolving the accounting problems resulting from this self-ownership aspect of cross shareholding. "Accounting for Companies Involved in Cross Shareholdings” has been authored by Professor Don Trow of Victoria University and Dr Tony van Zijl, the society’s director of research. The authors recommend that companies involved in

cross shareholdings should use the treasury stock method for calculating equity income, earnings per share and the carrying value of investment in associates.

The treasury stock method involves elimination of the self-ownership element and avoids double counting of income. “Research Bulletin” R--116 provides a detailed description of the procedures to be applied under the treasury stock method.

This method of accounting for cross shareholding is prescribed in the Society of Accountants’ recently released ED-38: "Accounting for Consolidations and Investments in Associates.”

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Permanent link to this item

https://paperspast.natlib.govt.nz/newspapers/CHP19861220.2.112.39

Bibliographic details

Press, 20 December 1986, Page 35

Word Count
172

Account solution Press, 20 December 1986, Page 35

Account solution Press, 20 December 1986, Page 35