Chapter 12 - Piecemeal Acquisitions

Question 1

Group structure changes

Answer 1

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

Question 2

Accounting for Group structure changes

Piecemeal Acquisition

Answer 2

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

Question 3

Accounting for Group structure changes

Disposals

Answer 3

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

Question 4

Accounting for Group structure changes

Re organization

Answer 4

Adjustments for unrealised profits and impairment

Question 5

Piecemeal Acquisition

Answer 5

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

Question 6

Accounting treatment before control

Answer 6

Apply the accounting standard relevant to the investment classification

Question 7

Investment classification

< 20% - Financial Asset

Answer 7

IFRS 9 - Financial Instruments

Non Current asset recorded at cost

Question 8

Investment classification

20% - 50% - Associate and Joint Venture

Answer 8

IAs 28 - Investment in Associates and JV

Equity Accounting based on the share of investment

Question 9

Investment classification

Joint Arrangement

Answer 9

IFRS 11 - Joint Arrangements

Share of investment recorded in individual accounts

Question 10

Control established

Answer 10

IFRS 3 - Business Combinations

Use Acquisition Accounting

• Recognize goodwill
• non-controlling interest

Question 11

Existing holding of shares

Answer 11

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

Question 12

Increase in control

Goodwill treatment

Answer 12

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

Question 13

Goodwill Calculation

Answer 13

Goodwill is calculated on the date that control is gained

Question 14

Goodwill on piecemeal Acquisition

Answer 14

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

Question 15

Adjustments to Parent’s Equity

Answer 15

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

Question 16

Accounting for increasing stake

Answer 16

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