Chapter 3 Flashcards
Marketable Securities
Trading - FV - Unrealized G/L (I/S)
Avail for Sale - FV - Unrealized G/L (OCI)
Held to Maturity - Amortized Cost
Avail For Sale IFRS
Foreign Exchange G/L on Debt AFS - I/S
Foreign Exchange G/L on Equity - OCI
Realized losses on AFS in I/S
Sale
Transfer to Trading
Impairment
Transfer to and from Trading
I/S @ FV
G/L on Hedge
I/S
Impairment
Avail for Sale - I/S (Recovery to OCI)
Held to Maturity - I/S (No recovery)
Sale of Avail for Sale
Out of OCI, into I/S
Reverse unrealized G/L OCI
Record realized G/L I/S
Business Consolidation
Economic substance over form
Do not consolidate if control is not with owners (legal reorganization, bankruptcy, with trustee)
Different year-ends
US GAAP - 3 months or less, use Sub’s FY (disclose)
IFRS - adjust
Levels of control
COST - No significant influence < 20%
EQUITY - With significant influence 20% to 50%
(Largest shareholder, majority of board)
CONSOLIDATE - With control >50%
COST Method
Avail for Sale/FV Method
Mark to market
Investment adjusted for unrealized G/L
Dividend Income
EQUITY Method - “Investment in Investee” B/S
Ignore FV
+ Share in earnings
- Share in dividends
- Amortization of FV Difference
EQUITY Method - “Equity in Earnings” I/S
+ Share in Earnings
- Amortization of FV Difference
Investment with C/S and P/S
Significant Influence - use C/S only
Income from Sub = P/F dividends + Share in Earnings avail for common shareholders (Net income - PF dividends)
Equity Method
Unconsolidated Investment over 50%
Joint venture`
Cost to Equity
IFRS - Prospectively
US GAAP - Retro Adjustment (Use Cost %)
- Reverse unrealized G/L in OCI the Ret Ear
ACQUISITION Method
Consolidate sub at 100% FV at acquisition date
Ret Ear, End adjust to Ret. Ear, Beg
CARINBIG
C/S Sub APIC Sub Ret Ear Sub Investment in Sub NCI B/S adjusted to FV Identifiable Intangibles to FV Goodwill/Gain
Acquisition Expenses
Direct and Indirect - expensed
Stock related costs - APIC
Bond Issuance cost - capitalized and amortized
In-process R&D
Intangibles - if success amortize, expense if fail
NCI
Partial = FV of Sub's Net assets x NCI Full = FV of Subsidiary x NCI %
Cash Flow - Period of Acquisition
- Net cash acquired - Investing
(Acquisition cost paid - Sub’s cash) - A/L of sub added to A/L of parent
Cash Flow - Subsequent Periods
- Exclude cash flow b/n parent and sub
- Reconcile net operating income to consolidated income
- Include dividends paid to NCI only
- Include acquisition of addtl shares on open market - investing
Consolidation and Deconsildation
- Non-control to Control (Step)
- Adjust previous C/S to implied FV
- G/L on I/S - Control to Control
- No G/L, APIC adjustment - Control to Non-control
- Sale G/L to I/S
- Adjust remaining C/S to FV to I/S
Intercompany transactions
- Eliminate 100% even with NCI
- Do not eliminate if not consolidating
- B/S
- Interco payables and receivables
- Gain on inventory and fixed asets
- Bonds & Prem/Disct with Investment
2/ I/S
- Interco Sales and COS
- Interest exp and income
- G/L on sale, depreciation exp
Elimination Entry - INVENTORY
Dr Interco Sales
Dr Retained Earnings (Interco profit in Beg. Inv)
Cr Interco COS
Cr Ending Inventory (Interco profit in End Inv)
Cr Cost of Goods Sold (Interco profit in COS)
Elimination Entry - Bond Transactions
Dr Bonds Payable
Dr Premium
Cr Investment in affiliate bonds
Cr Gain on extinguishment of bonds (or Loss)
Elimination Entry - LAND
Dr Interco Gain on sale of Land
Cr Land
Elimination Entry - PP&E
- Eliminate Interco Gain
Dr Interco Gain on sale of PP&E
Cr PP&E
Cr Accum Depr - Eliminate Excess Depreciation
Dr Accum Dep
Cr Dep Exp
Combined F/S
Common control
Common management
Uncosolidated subs
Combined F/S Transactions
Eliminate interco transactions
NCI same as consolidated F/S
C/S, Ret Ear and I/S added accross
Push Down Acctg
SEC required for wholly ownedsub
A/L to FV @ acquisition date
Ret Ear of sub transferred to paid in capital
Net Inc of each sub includes dep, amort and interest exp at FV
