Chapter 13 - IFRS 3 Business Combinations Flashcards
Methods of valuing non-controlling interest on the date of acquisition according IFRS 3
Method 1 - Proportion of Net Assets
(NCI % x Fair value of the net assets of the subsidiary at the acquisition date)
Method 2 - Full Goodwill
(Fair value of NCI at date of acquisition)
Fair Value Measurement is
Price that would be received in an open market transaction
Fair Value of Parent’s consideration
> Cash - FV = amount paid
Parent Issued Shares: FV = Market Price
Deferred Consideration: FV = Present Value
Contingent Consideration: FV = Probability weighted present value
Which method do you use to value non-controlling interest on the date of acquisition according to IFRS
Either Net Assets or Full Goodwill method
A acquired 70% of B’s £2 million equity and £1 million reserves for £3 million
FV of Non-controlling interest on acq is £1 million
B earned comprehensive income of £100k for YE 31st December 20x7
Group measures non-controlling interest using proportion of net assets
What is the balance of NCI
Equity shares: £2 million
Reserves: £1 million
Total: £3 million
Share of NCI is 30% of Net Assets
30% of £3 million = £900,000
Share of post acquisition reserves
30% of £100,000 = £30,000