Part 4 - Consolidations / EPS / Employee benfits / Events after the reporting period Flashcards
IFRS 3 - business combination IFRS 10 consolidated F/S IAS 27 - separate F/S ASPE 1582 Business combination ASPE 1591 Subsidiaries ASPE 1601 Consolidated F/S ASPE 1602 Non controlling interests IAS 33 Earnings per share IAS 19 employee benefit ASPE 3462 Employee future benefit IAS 10 - events after the reporting period ASPE 3820 subsequent events
What is business combination?
a transaction or other event in which an acquirer obtains control of one or more businesses
All business combinations should be accounted for by
acquisition method
Purchase price allocation calculation
purchase price imputed at 100% (purchase price = FV of NCI or purchase price / ownership % acquired)
less net assets acquired at book value
equal purchase price discrepancy
Allocate to each FMV differential (FMV - book value)
equal good will
What are some purchase price allocation amounts not included?
Acquisition related cost (finder fee, advisory, legal, accounting) are not considered and are expensed in profit and loss
Only cost to issue debt or equity securities are capitalized in BS
same with separate transaction are not considered
What happens to baring purchase
if purchase price less than FV of asset and liabilities, recognize gain in acquirer
Step acquisitions
acquisition is acquired in stages (initial purchased 35%, now 40% additional)
acquirer remeasures its previously held equity interest in the acquiree at its acquisition-date FV and recognize the resulting gain or loss
Measurement period
if initial accounting is incomplete, acquirer will use provisional amount
during measurement period, retrospective adjustment will be made
measurement can’t exceed for more than 1 yr
Control - investor must have all the following
- power over the investee
- exposure, or rights, to variable returns from its involvement with the investee- investor’s return have potential to vary due to investee’s performance
- the ability to use its power over the investee to affect the amount of the investor’s returns
Power - investors has…
- investor has existing rights that give it the current ability to direct the activities that significantly affect the investee’s return
investor owns, directly or indirectly through subsidiaries, more than 50% of voting rights
If both FS of parent and sub at different dates?
Should be the same unless impracticable
make adjustments for significant transactions or events in intervening period. no more than 3 months
an entity can elected to account for its investments in subsidiaries, joint ventures and associated at…
either at cost, or using the equity method (IFRS 9 financial instruments).
dividend from those are also recognized in the separate fs when declared (except when using IFRS 9 - reduction in carrying amount of the investment)
Basic EPS formula
Profit/loss attributable to ordinary shares / weighted average # or ordinary shares outstanding during period
What is diluted EPS?
= Profit/loss attributable to ordinary shares and impact of dilutive potential ordinary shares / Weighted average # of ordinary shares outstanding and impact of dilutive potential ordinary shares
How to account for convertible securities related to diluted EPS?
treat as if converted at beginning of the period or time of issue if later
How to account for option and warrants?
Use treasury stock method:
- treat as if exercised at earlier of beg of period or time of issue
- assume proceeds from exercise at the average market price during the period
- incremental shares should be included in denominator
What is basic Earnings per share calculation?
(NI - preferred dividend) / weighted average # of common shares
What’s the definition of preferred dividend for EPS calculation?
- non-cumulative shares - dividends declared
- cumulative shares - only current yr dividend entitlement
- any stock split/stock dividend is treated in effect for the whole period
What is in-the-money?
exercise price is lower than market value
How to calculate diluted EPS?
((Profit or loss attributable to common equity holders of parent company
+ After-tax interest on convertible debt + Convertible preferred dividends)) ÷
(Weighted average number of common shares outstanding during the period
+ All dilutive potential common stock)
What is defined contribution pension plan?
employer contributions are fixed - employee accepts risk
What is defined benefit pension plan?
benefits are fixed - employer accepts risk
Why do any actuarial gain/losses (experience adjustments) and differences between actual return on plan assets and expected return on plan asset have to be recorded in OCI?
The rationale for including the net remeasurement gains or losses in OCI rather than in net income is that remeasurement gains and losses arise as a result of unpredictable changes in the value of plan assets or the Defined benefit obligation
Defined benefit obligation
present value of all future employee benefits estimated to be paid as determined by the actuary. track but not on fs
Plan assets
Most benefit plans are funded because of regulatory requirements. When a benefit plan is funded, assets are placed in a separate legal entity (a trust). The assets are not included on the balance sheet of the reporting entity because the reporting entity does not own the assets
