Chapter 18 - Group Accounting - Basic Groups Flashcards
What is the definition of a parent?
An entity that controls one or more other entities
What is the definition of a subsidiary?
An entity controlled by another entity
What is included in the net assets of each subsidiary?
Share capital + retained earnings + other components of equity + fair value adjustments+ post acquisition of FVA and PURP adjustment is S is the seller
What is included in the goodwill calculation?
Fair value of consideration + NCI at acquisition - FV of sub’s assets at acquisition - impairment
What are the two methods are non-controlling interest at acquisition?
- Fair value
2. Proportionate share
What is included in the non-controlling interest?
NCI @ acq (W3) + NCI % post acquisition (W2) less goodwill impairment (FV method)
What is included within consolidated reserves?
100% of P reserves + P% of post-acquisition reserves - goodwill impairment + gain on bargain - PURP adj if P was seller
When deducting goodwill impairment in retained earnings, how should this be calculated?
- Deduct P% if the NCI was at fair value
2. Deduct in full if the NCI was valued proportionally
How are associates accounted for?
Using the equity method
What is the working for accounting for associates?
Cost of investment, + P% of post acq reserves less impairment to date
When does an investor controls an investee?
- Power over the investee
- Investor is exposed to. or has rights to variable returns
- Affect returns through its power
How is goodwill calculated using the fair value method?
Calculates full goodwill (Ps goodwill +NCIs goodwill)
How is goodwill calculated using the proportionate method?
Ps goodwill only
When does the measurement period end?
12 months after the acquisition date
When should good will be tested for impairment?
Annually
