MODULE 1

BUSINESS COMBINATION: RECOGNITION AND MEASUREMENT

TRUE OR FALSE

1. FALSE 11. FALSE

2. FALSE 12. TRUE
3. FALSE 13. FALSE
4. TRUE 14. FALSE
5. FALSE 15. TRUE
6. TRUE 16. FALSE
7. FALSE 17. TRUE
8. TRUE 18. TRUE
9. FALSE 19. FALSE
10. TRUE 20. TRUE

STRAIGHT PROBLEM
1. Requirement. Compute for the goodwill (gain on bargain purchase).

Consideration transferred P1,200,000

Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 1,200,000
Fair value of net identifiable assets acquired
(1.7M - 50K goodwill - 390K liabilities) (1,260,000)
GAIN ON BARGAIN PURCHASE (P60,000)

2. Requirement. How much is the goodwill if A Co. opts to measure the non - controlling interest at
the NCI's proportionate share in B Co.'s net identifiable assets?

Consideration transferred P1,200,000

Non-controlling interest in the acquiree [(1.7M - 400K) x 20%] 260,000
Previously held equity interest in the acquiree -
Total 1,460,000
Fair value of net identifiable assets acquired (1.7M - 400K) (1,300,000)
GOODWILL P160,000

3. Requirement. How much is the goodwill if A Co. opts to measure the non - controlling interest at
fair value? (An independent appraiser valued the NCI at P300,000).

Consideration transferred P1,200,000

Non-controlling interest in the acquiree 300,000
Previously held equity interest in the acquiree -
Total 1,500,000
Fair value of net identifiable assets acquired (1.7M - 400K) (1,300,000)
GOODWILL P200,000
4. Requirement. Compute for the goodwill (gain on bargain purchase).

Consideration transferred (10,000 x 100) P1,000,000

Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 1,000,000
Fair value of net identifiable assets acquired (1.8M - 900K) (900,000)
GOODWILL P100,000

5. Requirement. Compute for the goodwill.

Consideration transferred P1,500,000

Non-controlling interest in the acquiree 800,000
Previously held equity interest in the acquiree -
Total 2,300,000
Fair value of net identifiable assets acquired (5M + 80K customer
list - 2.8M liabilities - 30K liability on operating lease with
unfavorable terms) (2,250,000)
GOODWILL P50,000

6. Requirement. Compute for the goodwill.

Consideration transferred P1,600,000

Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 1,600,000
Fair value of net identifiable assets acquired (3.5M + 120K DTA -
1.9M liabilities - 100K contingent liability - 30K DTL) (1,590,000)
GOODWILL P10,000

Fair Value Tax Base TTD (DTD)

Assets 3,500,000 3,800,000 (300,000)
Liabilities 1,900,000 2,000,000 100,000
Contingent Liability 100,000 - (100,000)

Deductible Temporary Difference (DTD) (300K + 100K) P400,000

Multiply by: Tax rate 30%
Deferred tax asset P120,000

Taxable Temporary Difference (TTD) P100,000

Multiply by: Tax rate 30%
Deferred tax liability P30,000

7. Requirement. Compute for the goodwill (gain on bargain purchase).

Consideration transferred P1,800,000

Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total P1,800,000
 Fair value of net identifiable assets acquired (2.37M - 20K
goodwill - 700K liabilities) (1,650,000)
GOODWILL P150,000

8. Requirement. How much is the goodwill if Entity A opts to measure the non - controlling interest
at the NCI proportionate share in Entity B's net identifiable assets?
Consideration transferred P2,000,000
Non-controlling interest in the acquiree [(4M - 1.6M) x 25%] 600,000
Previously held equity interest in the acquiree -
Total P2,600,000
Fair value of net identifiable assets acquired (4M - 1.6M) (2,400,000)
GOODWILL P200,000

9. Requirement. Entity A opts to measure the non-controlling interest at fair value. An independent
valuer assessed the NCI fair value to be P540,000. How much is the goodwill?

Consideration transferred P2,000,000

Non-controlling interest in the acquiree 540,000
Previously held equity interest in the acquiree -
Total P2,540,000
Fair value of net identifiable assets acquired (4M - 1.6M) (2,400,000)
GOODWILL P140,000

10. Requirement. Compute for the goodwill (gain on bargain purchase).

Consideration transferred (18,000 x 100) P1,800,000

Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 1,800,000
Fair value of net identifiable assets acquired (3.8M - 1.9M) (1,900,000)
GAIN ON BARGAIN PURCHASE (P100,000)

11. Requirement. Compute for the goodwill.

Consideration transferred P2,800,000

Non-controlling interest in the acquiree -
Previously held equity interest in the acquiree -
Total 2,800,000
Fair value of net identifiable assets acquired (4M + 100K patent +
160K R&D + 40K intangible asset on operating lease with
favorable terms - 1.6M liabilities) (2,700,000)
GOODWILL P100,000

12. Requirement. Compute for the goodwill.

Consideration transferred P1,800,000
Non-controlling interest in the acquiree (2.2M x 25%) 550,000
Previously held equity interest in the acquiree -
Total 2,350,000
Fair value of net identifiable assets acquired (4M - 1.6M liabilities
- 200K contingent liability) (2,200,000)
GOODWILL P150,000