Acquisitions & Disposals Flashcards
What are the four approaches to the different situations
Disposal with loss of control
Disposal with control retained
Acquisitions with control achieved in stages
Acquisitions with increase in control
Delete
How to handle an acquisition & disposal question
Group structure
Dates of changes
How to treat a disposal with loss of control
From subsidiary to an associate under Equity method
Calculate Goodwill
Calculate Gain/Loss on Disposal:
- Determine the Net Assets at Date of Disposal
- Determine Value of What We Had vs What We Have Now
- Remove NCI
- Create asset for ‘Investment in Associate’
How to treat a disposal without loss of control
P&L Remains the Same as control remains
NCI’s share of profits time apportioned
Change is made only in equity
No gain or loss in the income statement; is recorded by increasing NCI, balance is adjusted in equity
How to treat a acquisition with no change in control
No gain or loss in the IS as no change in control
Dr NCI, Cr Adjustment to Parents Equity
No adjustment to goodwill as this is only when control is established, Dr Equity rather than Goodwill
How to treat a acquisition with change in control
Relationship change so Gain or loss on deemed disposal of associate; revalue from cost to Fair Value
Goodwill measured when control is established
Fair value of initial holding + cost of second instalment, less NCI
How would we deal with a company moving from a 60% to 70% ownership for a cost of £110 (for 10%) with an NCI at Acquisition = £400
NCI after Acquisition =300
Cr Cash 110
Dr NCI 100
Dr Retained Earnings (Adj to Parents Equity) 10
Split P&L and amounts attributable to NCI between two stages of the year
No goodwill as not achieving control at this stage
How is an associate valued under the equity method
Cost + Share of Post Acquisition Profits
How to treat a step acquisition
Deal with associate until control is obtained
Account for goodwill and record as subsidiary, making a gain or loss on ‘deemed disposal’ of investment
Goodwill = Cost of Purchase v Net Assets - NCI
Time apportioned profit and loss; if significant control before include within consolidated P&L
