M&A

Question 1

What is the % ownership for each acquisition their name and their sccounting methode

Answer 1

0% to 20%: non-strategic, FVPL and FVOCI

20% to 50%: associate, equity method

More than 50%: subsidiary, consolidation

Question 2

How do we record with fvpl

Answer 2

-investment recorded on balance sheet at fair value

-change in fair value recorded in net income

-investment income recorded in net income

-transaction cost expensed

-fvpl classification required if asset is held for trading

Question 3

How do we record fvoci

Answer 3

-irrevocable election made upon initial recognition

-recorded on balance sheet at fair value

-unrealized changes in fair value recorded in oci and aoci

-realized changes in value not recorded in net income

-investment income (dividends) recorded in net inclne

Question 4

What is the evidence that theres significant influence

Answer 4

-representation on investee bod

-participation in policy making process including participation in decisions about dividends or other distributions

-material transactions between the entity and its investee

-interchange of managerial personnel

-provision of essential technical information

Question 5

How do we record equity method

Answer 5

-recognize initial investment at cost

-increase or decrease carrying amount of investment by share if income (net income and oci)

• reduce carrying amount of investment by distribution

Question 6

How do we calculate the goodwill

Answer 6

Goodwill = transaction price - book value of net asset acquired +/- fair value increments

Question 7

Why does book value and fair value of net assets differ

Answer 7

-b/s is prepared using historical cost not fair value

-balance sheet is missing many keys assets:
Competence and skill
Brand name

Question 8

Explain the fair value increments adjustement

Answer 8

Adjust S b/s si that assets and liabilities are recorded at fair value

Adjust S depreciation expense:
Applies to both recognized and new assets
(Fv-bv)/remaining useful life

Question 9

Consolidated assets and liabilities are calculated by adding what

Answer 9

Book value of P+ book value of S + +/- FVI net of amortization + +/- eliminate intercompany balances * goodwill

Question 10

Consolidated net income

Answer 10

Parent net income + subsidiarys net income +/- FVI amortization +/- effect of intercompany transaction