Section 3...Business Combinations

Question 1

Goodwill with a non-controlling interest

Answer 1

Purchase Price +
Noncontrolling interest (% of shares acq x’s F.V. of stock price) -
F.V. of Identifiable Net Assets (Note that this is the TOTAL amount, it is not reduced)

Question 2

Cost considerations

Answer 2

Cash paid plus F.V. of stock issued
**Direct costs of carrying out combinations are expensed.

Question 3

Gains

Answer 3

Gains are recognized on investments when Investment value is LESS THAN F.V.

Question 4

Acquisition date

Answer 4

The date you obtain control

Question 5

Additional P-I-C

Answer 5

Immediately following a consolidation:

F.V. of stock issued is equal to F.V. of net assets acquired (total c/s + total add pic + total re)

So, take that total and subtract out the stock you issued at par. Difference is the answer.

Question 6

Accounting at year end

Answer 6

C/S and Dividends paid - ONLY take the final number from parent.
Dividends paid from sub are part of the NCI calculation
If there is an ‘Investment’ account on the Balance Sheet for an acquisition, it must be eliminated (probably at year-end)