ADVAC 2 Assign 7

Case 1: Fair value of Non-controlling interest in the Acquiree (Subsidiary) is not given.
COMPANY Z acquires 80% of COMPANY Y for P 10,000,000, carrying value of Company Y net assets at time of acquisition
being P 6,000,000 and fair value of these net identifiable assets being P 8,000,000

1. Goodwill arising on consolidation is to be valued on the proportionate basis of "Partial" Goodwill:

A. P 1,600,000 B. P 2,000,000 C. P 3,600,000 D. P 4,500,000

2. Using the same information in Case. 1, the amount of non-controlling interest arising on consolidation is to be valued
on the proportionate basis or "Partial" Goodwill:
A. P 1,600,000 B. P 2,000,000 C. P 3,600,000 D. P 4,500,000

3. Using the same information in Case 1, the amount of goodwill arising on consolidation is to be valued on the full (fair
value) basis or "Full/Gross-up" Goodwill:
A. P 1,600,000 B. P 2,000,000 C. P 3,600,000 D. P 4,500,000

4. Using the same information in Case 1, the amount of non-controlling interest arising on consolidation is to be valued on
the full (fair value) basis or "Full/Gross-up" Goodwill:
A. P 1,200,000 B. P 1,600,000 C. P 2,500,000 D. P 3,000,000
CASE 1
SOLUTION: Notes: Less than 100% acquired
Options: Either partial goodwill or proportionate basis;
Full/Gross-up Goodwill basis
FULL
100%
Total
1 Cash transferred(AC) 10,000,000/80% FULL 12,500,000
Less: BV of NA acquired 6,000,000x80% PARTIAL 6,000,000
DIFFERENCE 6,500,000
Allocated excess Fair value 8,000,000
Book value 6,000,000
FULL 2,000,000 2,000,000
PARTIAL x 80%
GOODWILL 4,500,000

2 Fair value of the (80%) net assets acquired 8,000,000

Book value 6,000,000
Difference 2,000,000

A Goodwill(Partial) = Cash transferred/Acquisition cost

Less: BV of NA acquired 6,000,000 x 80%
Difference
Allocation Fair value
Book value

B. NCI (Partial) = Fair value of net assets

Less: FV acquired by parent
NCI of subsidiary

C Goodwill(Full/Gross-up) = Cash transferred converted to 100%

Book value of NA acquired
Difference
Due to over/(under)

D NCI (Full) = Cash transferred converted to 100%

Cash transferred/Acquisition cost
 PARTIAL NCI
80% 20%
Parent Subsidiary
10,000,000 2,500,000 FULL
4,800,000 1,200,000
5,200,000 1,300,000

1,600,000 400
3,600,000 900,000

6,400,000 1,600,000 PARTIAL

4,800,000 1,200,000
1,600,000 400,000

10,000,000
6,000,000 x 80% 4,800,000
5,200,000
8,000,000
6,000,000
2,000,000 1,600,000 3,600,000

8,000,000
x 80% 6,400,000
1,600,000

10,000,000/80% 12,500,000
6,000,000
6,500,000
2,000,000 4,500,000

10,000,000/80% 12,500,000
10,000,000 2,500,000
Case 2: Fair value of Non-controlling interest in the Acquiree (Subsidiary) is given.

ENTITY SUBSIDIARY has 40% of its share publicly traded on an exchange. ENTITY PARENT purchases the 60% non
publicly traded shares in one transacton, paying P 6,300,000. Based on the trading price of the shares of Entity
Subsidiary at the date of gaining control a value of P 4,000,000 assigned to the 40% non-controlling interest
(or fair value of non-controlling interest), indicating that Entity Subsidiary has paid a control premium of P 300,000.
The fair value of Entity Subsidiary's identifiable net assets is P 7,000,000 and a carrying value of P 5,000,000.

5. Goodwill arising on consolidation is to be valued on the proportionate basis or "Partial" Goodwill:

A. P 1,200,000 B. P 2,100,000 C. P 3,300,000 D. P 4,120,000

6. Using the same information in Case 2, the amount of non-controlling interest arising on consolidation is to be valued
on the proportionate basis or "Partial Goodwill":
A. P 2,000,000 B. P 2,800,000 C. P 4,000,000 D. P 4,120,000

7. Using the same information in Case 2, the amount of goodwillarising on consolidation is to bevalued on the full (fair
value) basis or "Full/Gross-up" Goodwill:
A. P 1,200,000 B. P 2,100,000 C. P 3,300,000 D. P 4,120,000

8. Using the same information in Case 2, the amount of non-controlling interest arising on consolidation is to be valued
on the full (fair value) bais or "Full/Gros-up" Goodwill:
A. P 2,000,000 B. P 2,800,000 C. P 4,000,000 D. P 4,120,000
SOLUTION: NoteLess than 100% acquired
OptiEither partial goodwill or proportionate basis;
Full/Gross-up Goodwill basis
FULL
100%
Total
1 Cash transferred(AC) 6,000,000/60% FULL 10,000,000
Less: BV of NA acquired 5,000,000x60% PARTIAL 5,000,000
DIFFERENCE 5,000,000
Allocated excess Fair value 7,000,000
Book value 5,000,000
FULL 2,000,000 (2,000,000)
PARTIAL x 60% 300,000
GOODWILL 3,300,000

2 Fair value of the (60%) net assets acquired 7,000,000

Book value 5,000,000
Difference 2,000,000

A Goodwill(Partial) Cash transferred/Acquisition cost

Less: BV of NA acquired 5,000,000 x 60%
Difference
Allocation Fair value
Book value
60% x

B. NCI (Partial) Fair value of net assets

Less: FV acquired by parent
NCI of subsidiary

C Goodwill(Full/Gross-up) Cash transferred converted to 100% 6,000,000/60%

Book value of NA acquired
Difference
Due to over/(under)
Less: Premium

D NCI (Full) Cash transferred converted to 100% 6,000,000/60%

Cash transferred/Acquisition cost
 PARTIAL NCI
60% 40%
Parent Subsidiary
6,300,000 4,000,000 GIVEN
3,000,000 2,000,000
3,300,000 2,000,000

1,200,000 800,000
2,100,000 1,200,000

4,200,000 2,800,000 PARTIAL

3,000,000 2,000,000
1,200,000 800,000

6,300,000
000,000 x 60% 3,000,000
3,300,000
7,000,000
5,000,000
2,000,000 1,200,000 2,100,000

7,000,000
x 60% 4,200,000
40% 2,800,000

6,000,000/60% 10,000,000
5,000,000
5,000,000
2,000,000
300,000 1,700,000 3,300,000

6,000,000/60% 10,000,000
6,000,000
4,000,000
Case 3: Step-Acquisition: Consideration transferred fair value of Non-Controlling interest of the acquiree/subsidiary)
and Fair value of anypreviously held equity interest in the acquiree/subsidiary (step-acquisition) is given

PARES Company acquires 15 percent of SERAP Company's common stock for P 500,000 cash and carries the investment
using the COST METHOD. A few months later, PARES purchases another 60% of Serap Company's stock for P 2,160,000.
At that date, Serap Company reports identifiable assets with a book value of P 3,900,000 and a fair value of
P 5,100,000, and it has liabilities with a book value and fair value of P 1,900,000. The fair value of the 25% non-
controlling interest in Serap Company is P 900,000.

9. Goodwill arising on consolidation is to be valued on the proportionate basis or 'Partial" Goodwill:

A. P 84,000 B. P 100,000 C. P 300,000 D. P 400,000

10. Using the same information in Case 3, the amount of non-controlling interest arising on consolidation is to be valued
on the proportionate basis of "Partial" Goodwill:
A. P 300,000 B. P 500,000 C. P 800,000 D. P 900,000

11. Using the same information in Case 3, the amount of goodwill arising on consolidation is to be valued on the full
(fair value) basis or "Full/Gross-up" Goodwill:
A. P 84,000 B. P 100,000 C. P 300,000 D. P 400,000

12. Using the same information in Case 3, the amount of non-controlling interest arising on consolidation is to be valued
on the full (fair value) basis or "Full/Gross-up Goodwill:
A. P 300,000 B. P 500,000 C. P 800,000 D. P 900,000

13. Using the same information in Case 3, the amount of gain or loss should be recognized when the additional shares are acquired:
A. Zero B. P 40,000 gain C. P 40,000 loss D. P 68,000 loss
 Cost
SOLUTION: Notes: Initial 15% 500,000
Additional 60% 2,160,000
Control 75% 2,660,000

FULL
100%
Total
1 Cash transferred(AC) 2,160,000/60% FULL 3,600,000
Less: BV of NA acquired 2,000,000 x 60% PARTIAL 2,000,000
DIFFERENCE 1,600,000
Allocated excess Fair value 3,200,000
Book value 2,000,000
FULL 1,200,000 1,200,000
PARTIAL x 60%
GOODWILL 400,000

2 Fair value of the (75%) net assets acquired 3,200,000

Book value 2,000,000
Difference 1,200,000

s are acquired:
A Goodwill(Partial) Cash transferred/Acquisition cost
Less: BV of NA acquired 2,000,000 x 60
Difference
Allocation Fair value
Book value

B. NCI (Partial) Fair value of net assets

Less: FV acquired by parent
NCI of subsidiary

C Goodwill(Full/Gross-up) Cash transferred converted to 100% 2,160,000/60%

Book value of NA acquired
Difference
Due to over/(under)

D NCI (Full) Cash transferred converted to 100% 2,160,000/60%

Cash transferred/Acquisition cost
 FV BV
100% 100%
5,100,000 3,900,000
1,900,000 1,900,000
3,200,000 2,000,000 1,200,000

PARTIAL
60%
Parent
2,160,000
1,200,000
960,000

720,000
240,000

2,400,000 800,000 PARTIAL

1,500,000 500,000
900,000 300,000

2,160,000
1,200,000
960,000
3,200,000
2,000,000
1,200,000 720,000 240,000

3,200,000
x 75% 2,400,000
800,000

2,160,000/60% 3,600,000
2,000,000
1,600,000
1,200,000 400,000

2,160,000/60% 3,600,000
2,160,000 1,440,000
Case 4: FAIR VALUE OF SUBSIDIARY IS GIVEN.
Since FV of Subsidiary is given, it already includes all items such as CONSIDERATION TRANSFERRED, FV of NCI any any
previusly held equity interest in the acquiree.

On September 1, 2011, Company P acquires 75% (750,000 ordinary shares) of Company S for P 7,500,000. (P 10 per share)
In the period around the acquisition date, Company S's shares are trading at about P 8 per share. Company pays a
premium over market because of the synergies it believes it will get. If its therefore reasonable to conclude that
the fair value of Company S's as a whole may not be P 10,000,000. In fact, an independent valuation shows that the
value of Company S is P 9,700,000 (fair value of Company S).

14. Assuming that the FV of the net identifiable assets is P 8,000,000 (carrying value is P 6,000,000)
Goodwill arising on consolidation is to be valued on the proportionate basis or "Partial" Goodwill:
A. P 200,000 B. P 1,500,000 C. P 1,700,000 D. P 2,000,000

15. Using the same information in No. 14, the amount of non-controlling interest arising on consolidation is to be valued on the
proportionate basis of "Partial" Goodwill:
A. P 1,500,000 B. P 1,875,000 C. P 2,000,000 D. P 2,200,000

16. Using the same information in No. 14, the amount of goodwill arising on consolidation is to be valued on the full (fair value) basis or
"Full/Gross-up" Goodwill:
A. P 200,000 B. P 1,500,000 C. P 1,700,000 D. P 2,000,000

17. Using the same infformation in No. 14, the amount of Non-controlling Interest (NCI) arising on consolidation is to be valued on the
full (fair value) basis or "Full/Gross-up" Goodwill:
fair value) basis or

be valued on the