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 ?