Accrual Calculations with Mutual Holdings .

Abstract The article discusses a method of calculating the income accruals to the parent and to the subsidiary. Whenever mutual holdings exist between a parent and a subsidiary, a problem arises as how to account for these holdings. The author's proposed method of calculation finds its basis in the mathematics of infinite series--since in actuality the "accrual-vibration" is in the form of an infinite series. If the subsidiary holds a portion of the parent's stock, theoretically, it is entitled to an accrual from the parent. This accrual must consist not only of the subsidiary's share of the parent's income but also the subsidiary's share of that portion of the subsidiary's income that accrued to the parent. This then is the start of the "accrual-vibration." To carry this example one step further, on the second vibration the amount accruing to the parent is its share of that amount just accrued to the subsidiary. It is observed that the summation of a geometric series is a possible solution in determining the summation of accruals to the parent and to the subsidiary when mutual holdings are involved.