Chapter 3 Acquistion method Flashcards
How are direct costs related to combination treated. Other than registration and issuance costs of equity securities?
expensed in the period incurred to determine income.
How is income treated on consolidation?
In an acquisition the net income of a newly acquired sub will only be included in consolidate net income from the date of acquisition.
When acquisition accounting what are the general guidelines for assigning amounts to the inventories acquired?
Net assets acquired are based on fair market value. The fair market value of finished goods and merchandise inventory are based upon selling price less disposal costs and reasonable profit allowance.
How to determine income?
The difference between retained earnings plus any dividends declared, multiplied by the percentage owned
How much stock holders equity is reported at acquisition date?
The parents plus any non-controlling interest.
When the acquisition exceeds the fair value of net assets acquired how do you determine the amounts to be reported for the plant and equipment?
All assets and liabilities should be presented at fair value.
How is net income reported on the equity method?
Under the equity method the parents net income is used
How do you record a gain on sale of stocks if you go from controlling interest to non-controlling interest?
You first record the gain on the sale and then record the gain on the revaluation of the carrying amount of stocks.
How would you calculate NCI?
- determine the fair value of the NCI, multiply the NCI % by fair value
- Add the percentage of net income
- Subtract the percentage of dividends
How do you determine the FV of an acquisition?
Divided the amount you paid by the percentage you received.
How do you determine APIC when you issue stock for acquisition?
You find the difference between par value of stock and the market value and multiply it by the amount issued. Any legal fees are expensed to the income statement. And registration fees associated with the issuance reduces APIC.
How do you go from equity to fair value?
If you gain control you must record under fair value. Multiply the fair value by the percentage previously owned and adjust with a gain.
How to calculate good will under IFRS partial goodwill method?
Find the FV of the acquisition. Subtract your portion of the FV (%) by the amount you paid.
