Chapter 12 - Piecemeal Acquisitions Flashcards

1
Q

Group structure changes

A
  • Increasing an existing investment (piecemeal acquisition)
  • Decrease an existing investment (disposal: full or partial)
  • Group re-organisations
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2
Q

Accounting for Group structure changes

Piecemeal Acquisition

A

Goodwill impact of an additional stake
Non-controlling interest
Retained earnings
Changes in equity

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3
Q

Accounting for Group structure changes

Disposals

A

Profit on sale in the parent accounts
De recognition of subsidiary
Accounting for trade investment and associates
Changes in equity

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4
Q

Accounting for Group structure changes

Re organization

A

Adjustments for unrealised profits and impairment

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5
Q

Piecemeal Acquisition

A

Parent acquires control in a subsidiary in stages

Parent&raquo_space; 30%&raquo_space; Associate
01/01/20X1
Parent&raquo_space; 50% (80%)&raquo_space; Subsidiary
01/01/20X2

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6
Q

Accounting treatment before control

A

Apply the accounting standard relevant to the investment classification

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7
Q

Investment classification

< 20% - Financial Asset

A

IFRS 9 - Financial Instruments

Non Current asset recorded at cost

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8
Q

Investment classification

20% - 50% - Associate and Joint Venture

A

IAs 28 - Investment in Associates and JV

Equity Accounting based on the share of investment

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9
Q

Investment classification

Joint Arrangement

A

IFRS 11 - Joint Arrangements

Share of investment recorded in individual accounts

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10
Q

Control established

A

IFRS 3 - Business Combinations

Use Acquisition Accounting

  • Recognize goodwill
  • non-controlling interest
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11
Q

Existing holding of shares

A

Revalue shares to fair value. Any gain or loss is taken to the group’s income Statement

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12
Q

Increase in control

Goodwill treatment

A

Goodwill is not re-measured and no gain/loss calculated

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13
Q

Goodwill Calculation

A

Goodwill is calculated on the date that control is gained

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14
Q

Goodwill on piecemeal Acquisition

A

1))
> Consideration paid
> FV of previously held interest at date of control
> Proportionate share of Non-controlling interest

2))
> Equity
> Retained earnings / reserves
> (Sum) Net Assets Acquired

(1 minus 2)
Goodwill on Acquisition

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15
Q

Adjustments to Parent’s Equity

A
> Consideration Paid
Less:
> Decrease in Non-Controlling interest at date of acquisition 
Equals:
> Adjustment to parent’s Equity
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16
Q

Accounting for increasing stake

A

Dr / Non Controlling Stake
Dr / Retained Earnings
Cr / Cash