Set 7 FR 27 Business Combinations - sub meas

Question 1

What 4 statements are required post-acquisition?

Answer 1

SFP / Statement of Comp Inc / Statement of change in equity / Cash Flow

Question 2

First step is to amortize FV differentials identifed in the acq differential. When are the following items amortized? and income statement account affected?
Inventory
Depreciable Cap Assets
Land
Indefinite life intangibles
Long-term debt

Answer 2

First year assuming inv turns over multiple times - COS
Over remaining useful life of asset - dep or amortization expenses or impairment loss
When subsidiary sells land - gain/loss on sale
When subsidiary sells asset or it is impaired - gain/loss on sale or impairment loss
Over remaining term to maturity of debt - interest expense

Question 3

define current period amortization

Answer 3

amount of amortization of FV differential recognized in current period

Question 4

define unamortized FV differential

Answer 4

FV differential at acquisition less acc amortization, impairment losses or disposals recognixzed to date on FV differential

Question 5

Define downstream and upstream sales. How are they eliminated?

Answer 5

Downstream - sale from parent to subsidiary. 100% on parent.
Upstream - sale from subsidiary to parent. Eliminated between subsidiary and parent based upon their controlling interests.

Question 6

define unrealized profit and loss

Answer 6

original amount of profit or loss reported in the separate financial statements at time i/co sale occurs, less P/L realization to date

Question 7

define realized profit and loss

Answer 7

amount of profit or loss realized in a period

Question 8

when are the following items i/co sale profit realized?
Inventory
Depreciable cap assets
Non-depreciable assets

Answer 8

When sold outside company
When used over it’s useful life (along with depreciation)
When sold outside company