ADVANCE ACCOUNTING 2015 | ANTONIO DAYAG JR.

Case 3;
Proportionate Basis (Partial-goodwill Approach)
 Partial-goodwill
Fair value of subsidiary (75%):

Consideration transferred: Cash………………………..P 9,000,000 (75%)

Less: Book value of stockholders’ equity (net assets)
– S Company: P7,200,000 x 75%............................. 5,400,000 (75%)
Allocated Excess.………………………………………………...P 3,600,000 (75%)
Less: Over/undervaluation of assets and liabilities:
(P9,600,000 – P7,200,000) x 75%..................................... 1,800,000 (75%)
Positive excess: Goodwill (partial)…………………………….P 1,800,000 (75%)

 Non-controlling interest
Book value of stockholders’ equity of subsidiary…………..P 7,200,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P9,600,000 – P7,200,000)…. 2,400,000
Fair value of stockholders’ equity of subsidiary……………P 9,600,000
Multiplied by: Non-controlling Interest percentage.............. 25%
Non-controlling interest (partial)……………………………….P 2,400,000

Fair Value Basis (Full-goodwill Approach)

 Full-goodwill
Fair value of subsidiary…………………………………………. P 11,640,000 (100%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P7,200,000 x 100%............................... 7,200,000 (100%)
Allocated Excess.………………………………………………….P 4,440,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P9,600,000 – P7,200,000) x 100%.................................. 2,400,000 (100%)
Positive excess: Goodwill (full)……………………………….....P 2,040,000 (100%)

The full – goodwill of P2,040,000 consists of two parts:

Full-goodwill……………………………………………...P 2,040,000
Less: Controlling interest on full-goodwill
or partial-goodwill…………………………….... 1,800,000
NCI on full-goodwill……………………………………. .P 240,000

 Non-controlling interest
Non-controlling interest (partial)………………………………P 2,400,000
Add: Non-controlling interest on full -goodwill
(P2,040,000 – P1,800,000 partial-goodwill)…..…….... . 240,000
Non-controlling Interest (full)…………………………………..P 2,640,000

Problem III
Case 4:
Proportionate Basis (Partial-goodwill Approach)
 ADVANCE ACCOUNTING 2015 | ANTONIO DAYAG JR.

 Partial-goodwill
Fair value of subsidiary (75%):
Consideration transferred: Cash………………………..P 2,592,000 (60%)
Fair value of previously held equity interest
in acquiree P2,592,000/60% = P4,320,000 x 15%......... 648,000 . (15%)
Fair value of Subsidiary ..………………………………………. P 3,240,000 (75%)
Less: Book value of stockholders’ equity (net assets)
– S Company: (P4,680,000 – P2,280,000) x 75%.......... 1,800,000 .(75%)
Allocated Excess.………………………………………………....P 1,440,000 (75%)
Less: Over/undervaluation of assets and liabilities:
[(P6,120,000 – P2,280,000) –
(P4,680,000 – P2,280,000)] x 75%..................................... 1,080,000 (75%)
Positive excess: Goodwill (partial)……………………………...P 360,000 (75%)

 Non-controlling interest
Book value of stockholders’ equity of subsidiary…………..P 2,400,000
Adjustments to reflect fair value (over/ undervaluation
of assets and liabilities): (P3,840,000 – P2,400,000)…. 1,440,000
Fair value of stockholders’ equity of subsidiary……………P 3,840,000
Multiplied by: Non-controlling Interest percentage............ 25%
Non-controlling interest (partial)………………………………P 960,000

Fair Value Basis (Full-goodwill Approach)

 Full-goodwill
Fair value of subsidiary (100%):
Consideration transferred: Cash………………………..P 2,592,000 (60%)
Fair value of previously held equity interest
in acquiree P2,592,000/60% = P4,320,000 x 15%...... 648,000 (15%)
Fair value of NCI (given)…………………………………. 1,080,000 (25%)
Fair value of subsidiary………………………………………….P 4,320,000 (100%)
Less: Book value of stockholders’ equity (net assets)
– S Company: P2,400,000 x 100%.................................... 2,400,000 (100%)
Allocated Excess.…………………………………………………P 1,920,000 (100%)
Less: Over/undervaluation of assets and liabilities:
(P3,840,000 – P2,400,000) x 100%................................ …..1,440,000 (100%)
Positive excess: Goodwill (full)…………………………………..P 480,000 (100%)

The full – goodwill of P480,000 consists of two parts:

Full-goodwill……………………………………………...P 480,000
Less: Controlling interest on full-goodwill
or partial-goodwill…………………………….…... 360,000
NCI on full-goodwill……………………………………..P. 120,000

 Non-controlling interest
Non-controlling interest (partial)………………………………P 960,000
Add: Non-controlling interest on full -goodwill
(P480,000 – P360,000 partial-goodwill)…..…………....... 120,000
Non-controlling Interest (full)……………………………………P 1,080,000