Business combinations - after acquistion

Question 1

Fair value differentials

Answer 1

Amortized to consolidated I/s 
Inventory - in one year
Depreciables - over life of asset
Land - when sold record gain/loss
Intangible - when sold or impaired

Question 2

Intercompany transactions

Answer 2

Must be eliminated

Downstream parent to sub: Eliminate 100%
Upstream sub to parent: Eliminate parent portion only

Question 3

Consolidated I/S

Answer 3

1. Add revenue and expenses of parent and sub
2. Adjust for FV differentials amort
3. Intercompany sales adjustments

Question 4

Consolidated b/s

Answer 4

1. add assets and liab of parent and sub
2. Adjust b.s accounts for FV diff
3. Adjust for unrealized profit on intercompany assets sales
4. set up goodwill
5. Eliminate investment account and sub common shares
6. Set up NCI if parents owns less than 100%

Question 5

Adjusting Balance sheet accounts for intercompany sales

Answer 5

Inventory
Unrealized profit - decrease inventory
Depreciable capital assets gain - decrease