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    Lesson 3. Consolidated Financial Statements

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    The document discusses accounting for business combinations under IFRS 3, including the treatment of non-controlling interest (NCI) and sample computations. The NCI, which represents equity not attributable to the parent, can be measured at either fair value or the proportionate share of the acquiree's net assets. The sample computations show different approaches to calculating goodwill and NCI under the acquisition method.

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    Lesson 3. Consolidated Financial Statements

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    The document discusses accounting for business combinations under IFRS 3, including the treatment of non-controlling interest (NCI) and sample computations. The NCI, which represents equity not attributable to the parent, can be measured at either fair value or the proportionate share of the acquiree's net assets. The sample computations show different approaches to calculating goodwill and NCI under the acquisition method.

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    The document discusses accounting for business combinations under IFRS 3, including the treatment of non-controlling interest (NCI) and sample computations. The NCI, which represents equity not attributable to the parent, can be measured at either fair value or the proportionate share of the acquiree's net assets. The sample computations show different approaches to calculating goodwill and NCI under the acquisition method.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    35 views6 pages

    Lesson 3. Consolidated Financial Statements

    Uploaded by

    KsUnlocker
    The document discusses accounting for business combinations under IFRS 3, including the treatment of non-controlling interest (NCI) and sample computations. The NCI, which represents equity not attributable to the parent, can be measured at either fair value or the proportionate share of the acquiree's net assets. The sample computations show different approaches to calculating goodwill and NCI under the acquisition method.

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    © All Rights Reserved
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    of 6

    St. Vincent de Ferrer College of Camarin Prof.

    Adrigado

    BUSINESS COMBINATION – IFRS 3

    Non-Controlling Interest - NCI is the equity in a subsidiary not


    attributable, directly or indirectly to a parent. Also known as “ minority
    interest”

    The acquirer measures any NCI in the acquiree either at


    a. Fair value
    b. NCI proportionate share in the acquiree’s net identifiable assets.

    SAMPLE COMPUTATION
    On January 1, 2021, ABC acquired 80% of the voting shares of XYZ, Inc.
    On this date, XYZ’s identifiable assets and liabilities have fair values of
    1,200,000 and 400,000 respectively.

    CASH CONSIDERATION 1,000,000


    Add: NCI 155,000
    PHI 0
    Total consideration 1,155,000
    Less: FVNIA
    Assets 1,200,000
    Liabilities (400,000) (800,000)
    Goodwill 355,000
    31 Practical Accounting 2

    CASH CONSIDERATION 1,000,000


    Add: NCI 250,000
    Total consideration 1,250,000
    Less: FVNIA
    Assets 1,200,000
    Liabilities (400,000) (800,000)
    Goodwill 450,000

    CASH CONSIDERATION 1,000,000


    Add: NCI 160,000 (800,000*20%)
    Total consideration 1,160,000
    Less: FVNIA
    Assets 1,200,000
    Liabilities (400,000) (800,000)
    Goodwill 360,000
    Chapter 2- Business Combination 32
    33 Practical Accounting 2
    1. PURCHASE PRICE 1,200,000
    LESS: FVNIA
    TOTAL ASSETS 1,650,000
    TOTAL LIABILITIES (390,000) (1,260,000)
    GAIN ON BARGAIN PURCHASE 60,000

    Entries:

    Identifiable Assets Acquired 1,260,000


    Bonds Payable 1,200,000
    Gain on BP 60,000

    Bond issue cost 30,000


    Cash 30,000

    Legal Fees 10,000


    Cash 10,000

    2. Purchase Price 1,200,000


    Non controlling Interest 260,000
    Total Purchase Price 1,460,000
    Less: FVNIA
    Total assets 1,700,000
    Total liabilities (400,000) 1,300,000
    Goodwill 160,000

    Identifiable Assets Acquired 1,300,000


    Goodwill 160,000
    Cash 1,200,000
    Non controlling Interest 260,000
    Chapter 2- Business Combination 34
    3. Purchase Price 1,200,000
    Non controlling Interest 300,000
    Total purchase price 1,500,000
    Less: FVNIA
    Assets 1,700,000
    Liabilities (400,000) 1,300,000
    Goodwill 200,000

    Entries:

    Identifiable Assets Acquired 1,300,000


    Goodwill 200,000
    Cash 1,200,000
    NCI 300,000

    4. Purchase price 1,000,000 (10,000*100)


    Less: FVNIA
    Assets 1,800,000
    Liabilities (900,000) (900,000)
    Goodwill 100,000

    Identifiable Assets Acquired 900,000


    Goodwill 100,000
    Share capital 200,000 (10,000*20)
    Share Premium 800,000 (10,000*80)

    Share Premium 40,000


    Cash 40,000

    Professional Fees 60,000


    Cash 60,000
    35 Practical Accounting 2
    Date of business combination

    Computation for total assets

    1. Total Assets of Parent @ BV xxx


    2. Total Assets of the subsidiary@FV xxx
    3. Purchase Price(Cash or non-cash) (xx)
    4. Goodwill xxx
    5. Direct Cost (xx) (if paid)
    6. Indirect Cost (xx) (if paid)
    7. CTIR (xx) (if paid)
    Consolidated Assets xxx

    Computation Liabilities
    1. Liability of parent @ BV xxx
    2. Liability of Subs @ FV xxx
    3. Purchase Price (Bonds or Note Payable) xxx
    4. Contingent Consideration (CCP) xxx
    5. DC xxx (if unpaid)
    6. IDC xxx (if unpaid)
    7. CTIR xxx (if unpaid)
    Consolidated liabilities xxx

    Computation of SHE

    1. SHE of Parent xxx


    2. Non controlling Interest xxx
    3. Purchase Price (stock issuance@FV) xxx
    4. Gain -BPO, PHI xxx
    5. Direct Cost (xx) whether paid or not
    6. Indirect Cost (xx) whether paid or not
    7. CTIR (xx) whether paid or not
    Consolidated SHE xxx

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