F4 - M5 - Acquisition Method Part 2

Question 1

Noncontrolling Interest (NCI)

Answer 1

Parent does not control 100% ownership, other portion attributed to NCI

Reported at Fair Value in Equity Section of BS, separate from Parents

Balance Sheet reported with NCI

Acquisition Date Computation = Fair Value of Sub X NCI % = Controlling Interest

Question 2

Income Statement

Answer 2

Include 100% of subs revenues and expenses after acquisition; separate sub from parent

Question 3

BS Adjust to Fair Value

Answer 3

FV Sub = Acquisition Cost + NCI at FV

Adjust due to difference of BV and FV

1. BS - Adjust BV to FV
2. Intangible Assets - FV
3. Goodwill - Excess of FV over Sub

Question 4

Acquisition with Goodwill

Answer 4

1. Adjust BS to FV
2. Identifiable Intangible Assets to FV
   - Recognize intangible asset separately from Goodwill at acquisition date

Question 5

In-Process Research and Development

Answer 5

Recognize intangible asset separately from Goodwill at acquisition date

intangible asset = Finite Life or Indefinite Life

Question 6

Private Companies

Answer 6

May elect policy to not separately recognize the intangible assets

Question 7

Acquisition with Gain

Answer 7

FV of Assets acquired > FV of sub

1. Adjust BS to FV
2. Identifiable Intangible Assets to FV
3. Gain

Question 8

Measurement Period Adjustments

Answer 8

Uncertain values of assets and liabilities at acquisition date

• Cannot exceed one year from date of acquisition
• Ends when information is available

Adjustments

• adjusted to better reflect value
• new assets may be recognized