14: A.2. Business Combinations and Consolidations

Question 1

When the parent buys a company, it records the assets and liabilities and the fair value or the Book value

Answer 1

Correct answer: fair value, but the subsiduary keep its record at book value, for example when the it bays a company the subsidiary have an asset that the book value is 50,000$ it keep it like this in its records, but the parent see that is the fair value of it is 70,000$ so the parent record the fair value, at the consolidation financial statement at the end of the year the parent have to adjust the book values to the fair value

Question 2

What the parent company records in the acquisition data of the subsidiary

Answer 2

On the acquisition data, the parent recorded the investment in the subsidiary, and the consideration transfer (cash, stock)

Question 3

If the acquisition happened during the year, what part of the subsidiary’s income would we include?

Answer 3

We only include the revenue and the expenses at the acquisition date, not before
example: if we buy the company on April 1, we record the expense and the revenue from April 1 ,not before

Question 4

What does “proportionate consolidation” mean?

Answer 4

it means that you only show your shares of the project, not the NCI also

This mean, like when you have joint ownership with physical assets like (oil, gas,….)

its not allowed under IFRS