Chapter 13 - IFRS 3 Business Combinations Flashcards

1
Q

Methods of valuing non-controlling interest on the date of acquisition according IFRS 3

A

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)

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2
Q

Fair Value Measurement is

A

Price that would be received in an open market transaction

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3
Q

Fair Value of Parent’s consideration

A

> Cash - FV = amount paid
Parent Issued Shares: FV = Market Price
Deferred Consideration: FV = Present Value
Contingent Consideration: FV = Probability weighted present value

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4
Q

Which method do you use to value non-controlling interest on the date of acquisition according to IFRS

A

Either Net Assets or Full Goodwill method

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5
Q

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

A

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

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