#12 Flashcards
NCI under IFRS
FV of subsidiary net asset * NCI%
How should the acquirer recognize a bargain purchase in a business acquisition?
As a gain in earning at acquisition date. Assets and liabilities in a business combination must be valued at fair value. Bargain purchase means the fair value is more than the what’s been given, so the purchaser records it as gain.
Acquisition costs associated with a business transaction must be
expensed as incurred in current period
A is a wholly owned subsidiary of B. A purchase stock of B, after which B declares dividend. Should B report this transaction in its consolidated income statement
As the rule of economic entity states, you cannot make money selling stock to yourself. So the purchase of stock of a member of the consolidated group by another member of the group is treated as treasury stock transaction
How to figure out amount of intercompany sale between a company and its subsidiary
revenue of company + revenue of subsidiary - consolidated revenue
Intercompany revenue = carrying amount of the inventory that subsidiary purchased from parent or vice versa
Yoyoyo
All intercompany billings are eliminated in consolidation
Got it
Combined statements are used for companies
1) under common management or
2) commonly controlled companies or
3) unconsolidated subsidiaries
got it
How are Intercompany transactions and balances reported in combined financial statements?
Intercompany transactions and balances are eliminated in combined financial statement, just like consolidated financial statements. So intercompany loans and intercompany profits are eliminated.
When is income statement affected by trading securities and available-for-sale securities?
Income statement is affected by all trading securities gains and losses. For available-for-sale securities, only when the unrealized loss is permanent.
Is there valuation for unrealized gains and losses for trading securities?
Yes, in income statement
Transfer securities from trading to available-for-sale, will there be unrealized gains and losses?
NO.Unrealized gains and losses for trading securities are recognized in earning in the period incurred, so there is no adjustment needed.
How to calculate unrealized intercompany profit?
ending inventory of buyer * seller’s gross profit %
Factoring receivables without recourse is:
a sale transaction that transfer the risk of uncollectible accounts to the buyer.
Is direct write-off of collectible account expense consistent with acccrual accounting?
NO. Direct write-off does NOT mat expense with revenue, so it is not.
How does uncollectible account written off affect the uncollectible account expense?
Uncollectible account written off DECREASE the uncollectible account expense
When company A owns 60% of company B, what happens when A buys the remaining 40% of B?
Purchasing from the noncontrolling interest shareholders, it is an equity transaction. No gain or loss is recognized on the income statement.
Acquired (purchased) goodwill is not amortized
It is subject to the impairment test
Difference between gross method and net method for purchase discount?
Gross method: discount not applied in calculation, so if utilized, needs to be applied.
Net method: discount applied in calculation, so if not utilized, need to be subtracted from it.
2/15, net 30
2% discount if paid within 15 days, otherwise full amount due in 30 days.
