acc 408 chapter 4 LO 2,3,4; chapter 5 LO 2
sub net income - amortization * nci percentage
NCI share of consolidated net income =
economic unit
acquisition method concept - views the parent and subsidiary companies as single economic unit for financial reporting purposes - a controlled company must always be consolidated as a whole regardless of the parent's level of ownership
yes
are control premiums included in the fair value of the controlling interest?
yes
are separate independent valuations for controlling and NCIs often needed for measuring the total fair value of the subsidiary?
market activity in outstanding shares
direct evidence based on what will provide the best measure of acquisition-date fair value for the noncontrolling interest?
yes
do companies that make up a business combination frequently retain their legal identities as separate operating centers and maintain their own record keeping?
no
does any gross profit included in the transfer price affect the sales/purchase elimination ?
yes
does the consolidated balance sheet provide an owners' equity amount for the noncontrolling owners' interest - a recognition that the parent doesn't own 100% off the subsidiary's assets and liabilities ?
dr. investment (retained earnings), cr. cogs
entry *G - to remove from retained earnings the gross profit in beginning inventory and to currently recognize the profit through a reduction in cogs
dr. cogs, cr. inventory
entry g - to remove gross profit in ending inventory created by intra entity sale --
all subsidiary identifiable assets and liabilities at full fair value, nci at fair value, goodwill or gain from bargain purchase
for business combinations involving less than 100% ownership, the acquirer recognizes and measures the following at the acquisition date -- (3)
bargain purchase
if the total fair value of the acquired firm is less than the collective sum of its identifiable net assets, what occurs?
consolidated net income
includes 100% of the parent's net income and 100% of the subsidiary's net income, adjusted for excess acquisition date fair value over book value amortizations
nci
ownership interest in the subsidiary that are held by owners other than the parent - part of the equity of the consolidated group
sale/purchase
recording an inventory transfer as ... provides vital data to help measure the operational efficiency of each enterprise --
yes
regardless of the method used for pricing for intra entity transfer of inventory, must any remaining gross profit at year-end be removed in arriving at consolidated figures ?
nci
represents an additional set of owners who have legal claim to the subsidiary's net assets
yes
should acquisition date goodwill be apportioned across the controlling and noncontrolling interest?
no
subsequent to acquisition, are changes in current fair values for assets and liabiltiies recognized?
nci share of consolidated net income
the NCI share of adjusted subsidiary net income is equivalent to what ?
subsidiary
the noncontrolling shareholders' portion of consolidated net income is limited to their percentage of whose income?
nci in sub at beginning of current year, net income attributable to nci, subsidiary dividends attributable to nci, nci as of the end of the year
the parent must determine and then enter each of these figures when constructing a worksheet for partial ownership consolidations (acquisition method) -- (4)
fair value controlling interest, fair value nci
the total acquired firm fair value in the presence of a partial acquisition is the sum of two components at the acquisition date -- (2)
intra entity transfer
this is merely the internal movement of inventory, an event that creates no net change in the financial position of the business combination taken as a whole --
control premium
this is typically needed to acquire sufficient shares to obtain a controlling interest - acquirers frequently have to pay a premium price per share to garner sufficient shares to ensure a controlling interest
dr. sales, cr. cost of goods sold
to account for related companies as a single economic entity requires eliminating all intra entity transfers of inventory --
market trading prices
what provides an objective measure of the value value of NCI shares in the weeks before and after the acquisition ?
yes
is the total recorded (intra entity) sales figure deleted with the TI entry regardless of whether upstream or downstream?
consideration transferred by parent
measurement of the controlling interest fair value remains straightforward in the value majority of cases - what typically provides the best evidence of fair value of the acquirer's interest ?