F3_Acquistions Flashcards
What is the calculation for partial goodwill under IFRS?
Goodwill = Acquisition cost - Fair value of the subsidiary net assets acquired(net assets are all the assets added up minus the liabilities) (times the percent ownership you have).
How do you calculate the NCI?
Acquisition cost = Fair value times X percent owned.
When should you not consolidate with another entity?
If you don’t have more than 50%.
- If the other entity is in reorganization, or is bankruptcy.
- There are foreign severe related business type of transactions.
- Severe uncertainties.
Under the equity method what is the requirement for the accounting under this method?
You have to be able to exercise significant influence, even if you don’t hold 20 to 50% you can still account under the equity method.
What do you do when you have a step by step acquisition?
This basically means that you didn’t have controlling interest at one point now you do.
- The key thing to know is that you adjust retrospectively, and you will act like you been applying the equity method all along, but in the past you will use the past percentages, not the new percent.
- for the current and future years you will use the new ownership percent.
What is CAR IN BIG?
- This relates to consolidation accounting, using the acquisition method.
- C - common stock, APIC, retained earnings of the sub are eliminated
- A -
- R
- I - investment in sub is eliminated
- N - non controlling interest is created
- B - balance sheet of sub is adjusted to fair value
- I - identifiable intangible assets are recorded at fair value.
- G - goodwill or gain is required.
This is going to be the journal entry guide basically.
What is the difference between fees for finders? and Legal fees such as registration costs?
The registration and issuance costs will be deducted from APIC,
while the fees for finders will be expensed (Legal and consulting).
What is partial goodwill under IFRS?
Goodwill = Acquisition cost - fair value of subsidiary’s net assets acquired (times by the amount that you actually own).
For the NCI its just going to the net assets times the percent of NCI there is.
How do you find the inter-company sales?
You would look at the revenues for the parent and the subsidiary and add them together. Then you would subtract the consolidated total to get the inter company sales.
When it asks for how much should be payable from the sub to the parent how do you find that out?
First you add up the receivables and then subtract out the consolidated total for the receivables
How would you find the inter company profit or loss?
You would first add up the revenues of the sub and the parent, and then subtract out the consolidated totals. That will be inter company sales.
- Then you would do the same steps to figure out COGS, then subtract that from the inter company sales to get the profit.
How do you calculate the unrealized gross profit? And what do you do with this?
Inter company profit on inventory X (% of inventory that was purchased still on hand).
- You would subtract this from the consolidated total assets.
What amount would be reported as current inter company receivables?
The answer is usually 0, since they have to be eliminated.
- Especially if the answer asks for year end.
How do you get the carrying amount of inventory?
- You take the revenue of both the parent and the sub, and solve for the inter company sales that were eliminated,
- Then you multiply the number by the gross profit percentage (g to get the intracompany cost of goods sold or
If you have AFS securities and they have a temporary loss, how do you account for this?
How about if they are TS?
- First of all the loss does not go on the income statement unless it is permanent, or OTT.
- You will DR: OCI, and CR: A valuation account for the difference, and this is considered to be a non current asset.
- For the TS =, you will debit Income statement, and CR: Valuation allowance.
