FAR 4 - M5 ACQUISITION METHOD

Question 1

How should the acquirer recognize a bargain purchase in a business acquisition?

Answer 1

Record the discounted amount as a GAIN at acquisition date.

FV of Net assets of acquired co > purchase price

Question 2

FV of sub less acq cost = non controlling interest

To check: FV of sub x NCI %

Answer 2

Acq cost FV of sub x 75% 2850000
FV of sub (2850000/75%) = 3800000
NCI (3800-2850) = 950000

3800000
x25%
= 950000

Question 3

FV of sub less FV of net assets = Goodwill

Acquired 75% of sub at 12,000
FV of sub (12000/75%) = 16,000
Non controlling interest = 4,000

FV of net assets = 13,000

Answer 3

Assets @ FV 13,000
Goodwill 3,000
Investment in sub 12,000
Non controlling interest 4,000

Question 4

NCI / Non controlling interest

Answer 4

minority interest

owns less than 50% of o/s shares