Acquirer

Control

Acquiree
PFRS 3
Stock Acquisition PFRS 10

Acquirer -> Parent -> Separate FS

Acquiree -> Subsidiary -> Separate FS

Max - 3 months diff

Steps in Consolidation
1. Combine Assets, Liabilities, Equity, Income and Expenses of the Parent an
2. Eliminate intercompany accounts
a. Investment in Subsidiary
b. SHE of Subsidiary
3. Recognize FV Adjustments (NA of Subsidiary) , NCI , GW / G on BP
4. Eliminate Intercompany Transactions

Parent's Books Working Paper Eliminating Entry (neith

-For Consolidation
Inv in Subsidiary XX SHE of Subsidiary
Consideration XX FV Adjustments (FVA)
GW
Inv in Subsidiary
NCI
G on BP
 Net Asset Acquisition - assets and liabilites of the acquiree
-acquiree ceases to exist
Stock Acquisition - shares (voting =ordinary) of the acquiree
> 50% of the ordinary shares

Business Combination
Consolidated FS
Acquisition Date - > Loss of Control

Consolidate Consolidated FS (Parent and Subsidiary as one)

A/P - Parent Dep. Method

Parent - S/L
Subsidiary - DD Conso FS - S/L
penses of the Parent and Subsidiary

, GW / G on BP

Eliminating Entry (neither recorded in Parent and Subsidiary's Books)

BV of NA of Subsidiary
FVA

Parent's Consideration
NCI Consideration
Consideration > FVNA GW
Consideration <FVNA G on BP
f the acquiree

ary) of the acquiree

t and Subsidiary as one)

Conso FS - S/L

bsidiary's Books)

FV of NA of Subsidiary

Consideration (100%
interest)
Parent's Books

Inv in Subsidiary XX
Consideration XX

Consolidated Assets
Parent's BV XX
-Asset Consideration (XX)
Subsidiary' FV XX
GW XX
-Out of Pocket Costs (DAC, IDAC, SIC(XX)
Consolidated Assets XX

Consolidated Assets
Parent's BV
+Inv in Subsidiary
-Asset Consideration (Cash/NCA)
-Inv in Subsidiary
Subsidiary's BV
FVA of Assets
GW
-Out of Pocket Costs (DAC, IDAC, SIC,BIC)
Working Paper Eliminating Entry (neither recorded in Parent and Subsidiary's Books)
-For Consolidation XX
SHE of Subsidiary XX
FV Adjustments (FVA) XX
GW XX
Inv in Subsidiary XX
NCI XX
G on BP XX

Consolidated Liabilities Consolidated Equity

Parent's BV XX Parent's BV
+ Liabilities Consideration XX + Equity Consideration
Subsidiary's FV XX + NCI
-BIC (XX) + Gain on BP
Consolidated Liabilities XX - DAC, IDAC, and SIC
Consolidated Equity
and Subsidiary's Books)

XX
XX
XX
XX
(XX)
XX
Step Acquisition
-previous ownership before gaining control
-remeasure to FV -Parent's CT

CA vs FV

-gain/loss on remeasurement
Silent/ FV is not given
20% interest
40% interest FV of Previous Ownership
60 % interest / control

> 50% interest

 control
ent's CT
Previous Ownership G/ L on remeasurement
FVPL/ Inv in Assoc/ JV P/L
FVOCI OCI

P's addtl acquisition as basis

Previous Ownership
P's Addtl Acquisition X Previous Ownership %
P's Addtl %
 Parent NCI Total
CT XX 40XX
-FVNA XX 40XX allocate thru Equ
GW/G on BP XX 0XX

GW Ratio
CT >FVNA, GW
CT <FVNA , G on BP

Parent NCI Total

CT 40
-FVNA 60 40 100
GW/G on BP XX XX XX

Purpose
1. See clearly the NCI - PS (min amt)
2. See the GW Ratio - used for allocation of GW Impairmen
GW allocated to Parent/NCI
 FV/PS

cate thru Equity %

No Gain on BP -> NCI
0/ GW - > NCI

FVNA X NCI %
NCI - PS - min amt

Example
FV of NA of Subsidiary - 100K
NCI % - 40%
NCI - FV
FV -30K
NCI - PS (min amt)

W Impairment Loss
Control Premium/Discount
-additional/negative consideration given by the paren
- part of Parent's CT -computation of GW
-excluded of Parent's CT - computati
y the parent to obtain control over subsidiary

computation of NCI - Implied FV

Partial GW - NCI (measured under PS) - GW allocated
Full GW - NCI (measured under FV) - GW allocated

Parent
CT XX
-FVNA XX
GW/G on BP XX
GW allocated to
GW allocated to Parent
GW allocated to Parent and NCI

NCI Total
50XX
50XX
0XX
W allocated to Parent
Non-Controlling Interest
-% not owned by the Parent/Controlling Interest
- Measurement FV
-within equity ,accounted for separately

Proportionate Share
- share of NCI in NA of Su
- min amt of NCI

FV > = PS (min amt), use FV

FV < PS (min amt), use PS

Usually given (FV /PS) . If Silent, implied FV

Implied FV Example
Parent purchased 80% of Subsidiary for 100K
NCI - Implied FV?
Parent 100K 80% 100K
20% 80%

PS Example
Parent purchased 80% of Subsidiary for 100k. BVNA of Su
Undervaluation of NA of Subsidiary amountin to 30K
NCI - PS? 16K

BVNA 50K
FVA (+) 30K NCI - PS
FVNA 80K X NCI % 20% = 16K
 Parent 70%
NCI 30%
Given FV
Implied FV -Parent's Consideration as basis
P's CT X NCI %
P's %
te Share FVNA X NCI %
CI in NA of Subsidiary

t), use FV
use PS

X 20% = 25k

k. BVNA of Subsidiary is 50K

n to 30K
NCI - PS
= 16K
Partial GW - NCI - PS 80% 20%
Parent NCI Total
CT 16800 3600 20400
-FVNA 14400 3600 18000
GW/ G on BP 2400 0 2400

Full GW - NCI -FV 80% 20%

Parent NCI Total
CT 16800 4000 20800
-FVNA 14400 3600 18000
GW/ G on BP 2400 400 2800

Partial GW - NCI (measure- GW allocated to Parent

Full GW - NCI (measured u- GW allocated to Parent and NCI
 Parent NCI Total
CT XX XX XX
-FVNA XX XX XX
GW/G on BP XX XX
 1
A X 2400
B X 2800
C /
D X 400
2. C

FVNA 18000
NCI % 20%
NCI 3600

NCI - Implied FV
Parent's CT 16800
-Parent's CP -800 16000
x 20%
P's CT, net of CP 16000 80% 80%
NCI - Implied FV 4000 20%
thru Equity Interest
Previous Ownership 10% 500K
Addtl Interest 70% 3780K
80%
> 50% Control

APL's Books
5/1/2023FVOCI 500
Cash 500
3/3/2023FVOCI 40
UG - OCI 40
Inv in Sub 4320
FVOCI 540
Cash 3780
Full GW (NCI - FV) Parent (80%)NCI (20%)
CT 4320 980
-FVNA 3760 940
GW/ G on BP 560 40
Partial GW (NCI - PS) Parent (80%)NCI (20%)
CT 4320 940
-FVNA 3760 940
GW/ G on BP 560 0
-> remeasure to FV (540K) -> Parent's CT

3780K 70%
540K 10%
3780K
Previous Ownership (FV) = 70% X 10%

3
A. /
B /
10% C /
70% D X
 4B
P's CT
Total 540 10%
5300 3780 70%
4700 4320
600MM Company
Total FV of Assets 7300
5260FV of Liabilities -2600
4700FVNA 4700
560
40K
Consolidation @ Subsequent Date
Allocation of Consolidated Net Income
CNI attributable to Parent (CNI - P)- > Consolidate
CNI attributable to NCI (CNI - NCI) - Non Controlli
CNI -P
CNI
CNI -NCI
NI -P NI - S
ubsequent Date Corporatio
olidated Net Income
le to Parent (CNI - P)- > Consolidated Retained Earnings (CR
le to NCI (CNI - NCI) - Non Controlling Interest (NCI)
 Net Income - > Retained Earnings

d Earnings (CRE)
t (NCI)
CNI Parent
NI - P XX
-Div I from S (XX)
SNI / NI -Own -P XX
NI - S XX
- FVA (+) - Amort. (XX)
+ FVA(-) - Amort. XX
-GW Impairment Loss (XX)
+Gain on BP XX
-DS - Unrealized Gain (XX)
+ DS - Realized Gain XX
+DS - Unrealized Loss XX
-DS - Realized Loss (XX)
-US - Unrealized Gain (XX)
+ US - Realized Gain XX
+US - Unrealized Loss XX
-US - Realized Loss (XX)
CNI XX
Timing/Amt: A/L affects the P/L
Inv Sale
Depreciable Asset Depreciation/
Non-Depreciable Asset Sale

Reminder
SNI/ NI - Own - P
(Separate NI / NI from Own Operations)
-excluded Div Inc from S
- no need to deduct DI from S

Intercompany Transactions
Parent
Downstream

Subsidiary

Seller -> recognize gain/loss

Conso FS (Parent and Subsidiary as one)

Realized/Amortized

Timing/Amt : A/L affects the P/L

Inv- Sale ,DA - Depreciation/Sale , NDA- Sale
NCI Total
XX
(XX)
XX
XX XX allocate thru Equity %
(XX) (XX) allocate thru Equity %
XX XX allocate thru Equity %
(XX) (XX) allocate thru GW ratio
XX
(XX)
XX
XX
(XX)
(XX) (XX) allocate thru Equity %
XX XX allocate thru Equity %
XX XX allocate thru Equity %
(XX) (XX) allocate thru Equity %
XX XX
 Subsidiary
FVNA
Equipment (UL =10 yrs)
BV 100K
FV 150K
FVA (+) 50K

Amortization of FVA
FVA (+) ->Amort.
preciation/Sale FVA (-) ->Amort.
 Parent
wnstream (Parent - Seller) Upstream (Subsidiary -

Subsidiary

Seller
DS Parent
-Unrealized GaiUS Subsidiary

-Realized G/L
DS- Downstream

US- Upstream
 DE - BV 10K
DE - FV 15K
NI (↓) ,DE (↑) 5K

ation of FVA
NI (-)
NI (+)
m (Subsidiary - Seller)

Adjustment of UG/L and RG/L

CNI -P
CNI -P and CNI -NCI
Parent's Books
Inv in Subsidiary
Silent: Cost Method
Dividends received from Subsidiary
-Dividend Income
Consolidated FS (Parent and Subsidiary)