F3 - Acquisition Method Flashcards
Fees of finders and consultants are:
Expensed in the period incurred.
Registration fees for equity securities issued decrease:
Additional Paid-in Capital (Stockholders’ Equity)
When a subsidiary is acquired with an acquisition cost that is less than the fair value of the underlying assets, the following steps are required:
- The balance sheet is adjusted to fair value, which creates a negative balance in the acquisition account.
- Identifiable intangible assets are recognized at fair value; which increases the negative balance in the acquisition account.
- The total negative balance in the acquisition account is recorded as a gain.
In an acquisition, the net income of a newly acquired subsidiary will
Only be included in consolidated net income from the date of acquisition.
Total consolidated stockholders’ equity will be equal to:
Parent’s stockholders’ equity plus the fair value of any noncontrolling interest.
When the acquisition price exceeds the fair value of net assets acquired, assets and liabilities should be presented at
Fair value
Consolidated net income is ______________, when the equity method is used
The same as parent company net income
Under U.S. GAAP, goodwill is the difference between:
Fair Value of the subsidiary and fair market value of the net assets acquired.
Eliminating Entry
“CAR IN BIG”
“C”ommon Stock
“A”PIC
“R”etained Earnings
“I”nvestment in subsidiary
“N”oncontrolling Interest
“B”alance Sheet adjustments to FV
“I”dentifiable intangible assets to FB
“G”oodwill
When the financial statements of two companies are consolidated, the equity, including retained earnings of the subsidiary will be eliminated. The consolidated statement of retained earnings will include how much of the dividends paid between the Parent and Subsidiary?
It will only include the dividends paid by the Parent company during the current year due to the eliminating entry.
In an acquisition method business combination, registration and issuance costs are recorded as
A direct reduction to the value of the stock issued by reducing APIC and direct out-of-pocket costs such as legal and consulting fees are expensed (Income Statement)
When an investor goes from non-control to control of a subsidiary through a step acquisition, the previously held equity investment must be:
Adjusted to fair value. The fair value adjustment is recognized as a gain or loss by the investor in the period of the additional acquisition.
US GAAP Noncontrolling Interest =
NCI = Fair Value of subsidiary x NCI %
Under IFRS Noncontrolling interest =
NCI = FV of subsidiary net assets x NCI %
Under IFRS partial goodwill method, goodwill is calculated as follows:
Goodwill = Acquisition cost - Fair Value of net assets acquired.
