Investment equity reconciliation: A Recommendation on new Accounting procedures

Investment equity refers to the money that is invested in a company by its owner of common stock  but which isn't returned in the usual course of the business. Investors retrieve it only when they sell its shareholdings to other investors, and also when the assets of the company are liquidated and proceeds spread among them after satisfying the company's obligations. Also known as equity contribution.

An excellent exercising is often carried out by the holding firm will be to prepare proper documentation to reconcile investor's cost associated with investment to investee's share capital for the investment equtiy relationships throughout the Group.

The procdure seems to become straight forward, uncomplicated and non complex on very first thought. Nevertheless, the reconciliation can turn into a complicated process and resulting from:

• impairment already been recorded for cost of investment
• variance exchange rate was applied to translate the funding (i.e. investor applied exchange rate  A, when investee applied exchange  B)
• funding remitted or received will not be recorded in proper account, and so forth

This  process is specifically valuable for entities with substantial variety of subsidiaries. Discrepancies (among cost associated with investment and share capital) are often anticipated for huge group of entities.

This reconciliation excercise enable to make sure that acceptable figures are recorded in particular source of ledger, and make sure that proper elimination are performed at group level.