Consolidation At Acquisition Date Flashcards
List the basic consolidation procedures.
- Elimination of common items
- Consolidation or combination of the remaining non-common items, line by line by adding together like items of assets, liabilities, equity, income and expense
What is eliminated in the elimination of common items?
Investment in subsidiary in the book of the parent and the parent’s portion of the equity in the book of the subsidiary
What is the procedures to combine the non-common items?
Line by line of each like items in the statements
What can be used for consolidation purpose?
- An analysis of owner’s equity in the subsidiary
- Pro forma consolidation journal entries
- Consolidation worksheet
What is the acquisition date?
The acquisition date is the date on which the acquirer(parent) obtains control over the acquiree (subsidiary)
What is the measurement principle in terms of IFRS3?
The acquirer (parent) shall measure the identifiable assets acquired and the liabilities assumed at their acquisition date fair value.
Where shares in a wholly owned subsidiary are acquired by the parent at a consideration equal to the fair value of the net assets on the first day of the reporting period as it appears in the accounting records of the subsidiary. This is known as?
Acquisition of shares at the fair value of the identifiable assets and liabilities of the acquiree
What is the investment in subsidiary set off against?
It is set off against the total equity of the subsidiary as at the acquisition date, i.e. share capital and retained earnings
What is a premium?
Where interest is acquired at more than the fair value of the identifiable assets and liabilities of the acquiree. also know as goodwill and this is regarded as an asset of the subsidiary.
What is the accounting treatment of goodwill?
In the case of wholly owned subsidiary, the acquirer (parent) shall recognize goodwill as of the acquisition date in a business combination, measured as the excess of the consideration transferred (at fair value) over the net of the identifiable assets acquired and the liabilities assumed and the contingent liabilities, based on acquisition fair value (the equity of the subsidiary).
After initial recognition, the parent shall measure goodwill acquired in a business combination at cost less any accumulated impairment losses.
Where is goodwill presented in the consolidated financial statements?
Goodwill is an intangible asset that is presented as a non-current asset in the consolidated statement of financial position.
What is interest acquired at a discount?
Where interest acquired at less than the fair value of the identifiable assets and liabilities of the acquiree. This is also known as a gain from bargain purchase, this is recognized in profit or loss on the acquisition date, such gain on a bargain purchase increases the equity at the acquisition date. Therefore it is recognized in the consolidated statement of financial position as part of retained earnings (plus).
What is a non-controlling interest?
Where the parent does not acquire the entire issued share capital of a subsidiary, the owners other than the parent are referred to as the non-controlling interest.
What is the definition of a non-controlling interest?
Equity in a subsidiary not attributable, directly or indirectly, to the parent
What is the treatment for non-controlling interest?
In preparing consolidated financial statements, the non-controlling interests in the net asset of the consolidated subsidiary, as well as the non-controlling interests in the profit or loss of consolidated subsidiaries for the reporting period, is identified separately for the parent’s ownership interests in them.
The NCI shall be presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.
