How is the NCI’s portion of the subsidiary calculated on the date of acquisition under GAAP?
NCI Interest: Fair value of subsidiary (this is not the price paid) x NCI %
TO CALCULATE TOTAL FAIR VALUE = price paid / percentage of company the parent is purchasing
How is the NCI’s portion of the subsidiary calculated after the date of acquisition? What accounting method is used?
The equity method
Ending NCI Interest: Beginning NCI interest + NCI’s share of sub’s net income - NCI’s share of sub’s dividends
Total consolidated equity includes which items?
The parent’s common stock
The parent’s APIC
The parent’s Retained Earnings
The NCI’s interest in the subsidiary
The subsidiary suffered a loss in net income for this year. How does this affect the NCI’s portion?
It doesn’t – the NCI gets the percentage ownership of the loss.
How is the NCI’s portion of the subsidiary calculated on the date of acquisition under IFRS Partial Goodwill method?
Fair value of the net identifiable assets including book value x NCI % = = NCI Interest
NOTE: fair value is NOT calculated as (price paid by new parent / % ownership of new parent) because that would include the goodwill portion.
The fair value of a subsidiary on the acquisition date is calculated as…
Acquisition cost + NCI portion at FV OR
Price paid for acquisition / % ownership of new parent
How is goodwill calculated using (1) GAAP full goodwill vs (2) IFRS partial goodwill method?
GAAP: Full Goodwill
FV of the sub – FV of the identifiable assets = Goodwill
Goodwill x NCI % = NCI’s portion
Goodwill x parent’s % = parent’s portion
IFRS: Partial Goodwill
NCI’s Portion = Identifiable assets (including book value) x NCI % = NCI’s portion
Goodwill to Parent = Acquisition Price – (identifiable assets x parent’s %)
In-process R&D on the date of acquisition of a subsidiary is included in which line item? How are costs associated with this R&D accounted after the acquisition date?
In Process R&D (IP-R&D) is considered an intangible asset on the date of acquisition
Expense all costs that occur after the acquisition date.
IF R&D is subsequently successful then amortize the IP-R&D
If R&D subsequently fails then impair IP-R&D
What is the acronym and each component for the balance sheet adjustments in a consolidation?
C… [DR] Common Stock (of sub)
A… [DR] APIC (of sub)
R… [DR] Retained Earnings (of sub on acquisition date)
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I… [CR] Investment in Sub
N…[CR] NCI
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B… [DR] Balance sheet to FV for tangible assets
I… [DR] Intangible assets to FV
G.. [DR] Goodwill
What is the period of time when the acquisition amounts can be adjusted?
The earlier of when it becomes obvious that no better information will become available OR
one year from the date of acquisition.
When a measurement period adjustment is made, the adjustment is offset from which account?
Goodwill
True / False: Changes in value caused by events after the acquisition date are included in the measurement period adjustments.