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