CSFP (Theory) Flashcards
First component of goodwill calculation?
Consideration transferred
What does consideration transferred refer to?
Total assets given, total liabilities and equity insutrments issued by acquirer.
Total costs of acquiring a business
What is deferred consideration?
Consideration that is paid in future is discounted to PV to determine FV
How is contingent consideration measured?
Measured at fair value at acquisition date
A gain on bargain purchase? (Meaning)
When a business acquired for less than FV of its net assets
Where is gain on bargain purchase recognised?
Typically recognised in income statement as income. It is a positive economic benefit
What fair value must be established?
FV of non-controlling interest and net assets acquired
Ways to calcualate NCI
FV (how much it costs for acquirer to acquire remaining shares)
Proportionate share of FV of net assets
FV (how much it costs for acquirer to acquire remaining shares)? What is done
NCI must be allocated any subsequent impairment losses
Proportionate share of FV of net assets? (Identifiable net assets mean)
No NCI interest in goodwill is recognised
What is an example of consideration?
A payment of $10 million in cash
Calculate goodwill?
Consideration + NCI at acquisition - net assets
What are intracompany balances?
Transactions between entities that are apart of the same group. These are eliminated to avoid double counting
What is cash in transit?
Cash movements from one location to another
What is done when a subsidiary is acquired midway through the year?
Distinguish between pre-acquisition and post-acquisition profits
What is done for pre-acquisition profits?
Included in retained earnings
What is done for post-acquisition profits?
Included in group profit for the year
Assumption for profits?
Accrue evenly
Example of other components of equity?
Revaluation surplus
Pre-acquisiton of other components of equity?
Included in goodwill calculation
Post-acquisition of other components of equity when there’s movement between acquisition date and reporting date?
Show parent’s other components of equity + share of movement on subsidiary’s other components of equity
What should current account receivable equal?
Current account payable
Cash in transit entry?
Increase cash
Decrease receivables
Goods in transit entry?
Increase inventories
Increase payables
Eliminate intragroup receivables and payables?
Decrease receivable
Decrease payable
Sold to a third party?
Profit realised
Kept in inventory?
Proift unrealised
Post-acquisition figure from net assets?
Used in NCI % of subsidiary’s post-acquisition
Deferred cash consideration?
Deferred cash * appropriate discount rate
