BUSINESS COMBINATION Flashcards
How to calculate the total consideration transferred for the business combination?
Total Consideration Transferred for the Business Combination = (cash) + (stock) + (fair value of contingent-based consideration)
How to calculate for the Fair Value of the NCI?
= (Purchase Price of Investment in Subsidiary) / (Ownership %)*NCI%
How to calculate the depreciation expense in Parent’s year-end consolidated income statement?
Depreciation Expense = Parents Depre + Subs Depre - ($ Gain from Sale of Equipt / Period of Depreciation)
Note: Do not use the $ purchased of Equipt, rather use the $ Gain.
How to calculate Stockholder’s Equity in Consolidated Balance Sheet?
Assets = Parent’s + Sub
Liability = Parent’s + Sub
Equity = PARENT ONLY
The Subsidiary’s Stockholders’
Equity Accounts are ELIMINATED through consolidation so that only the asset and liability accounts of the subsidiary remain to be combined with the parent company accounts.
The consolidated entity would include only Parent’s Retained Earnings and Equity and therefore would include only Dividends Paid by Parent.
Dividend Paid by Subsidiary either to Parent or to Non-Controlling Interest is not included in the consolidated statement of retained earnings.
Change in Parent’s % Ownership in Subsidiary.
a) Orig % of Ownership * $ SHE
b) New % Ownership * ($ SHE + $ SHE NCI)
c) Change In % = (a - b)
What is the total non-controlling interest after the additional shares are issued?
a) Non-controlling Interest %
= (Total New Equity - Orig Issued Equity)/ New SHE
=(25k-16k) / 25,000 = 36%
b) Total New Equity = Old + New
= $700,000 (Old 500,000 + New 200,000).
c) Value of Non-Controlling Interest
= Non-Controlling Interest x Total equity
= $700,000 x 36% = $252,000.
An “____” is any legal structure used to conduct activities or to hold assets.
An “entity” is any legal structure used to conduct activities or to hold assets.
A “variable interest entity” is defined based on the characteristics of the entity. To be considered a business, the entity must meet the requirements set forth in GAAP.
A “special purpose entity (SPE)” is not recognized in US GAAP.
What percentage of the common stock cash dividends declared by the individual companies should be reported as dividends declared in the consolidated financial statements?
Total Dividends Payable reported in Consolidated Financial Statements would be
= Dividends Payable by Parent + Dividends Payable by Subsidiary - Intercompany Dividends.
Does technology-based intangibles include in-process research and development activities to be consolidated?
TRUE
How to calculate the cost of sales in its year-end consolidated income statement?
COS = Parents COS + Subs COS
- (Parents sold Inv to Sub)
What amount of unrealized intercompany profit was eliminated?
Interco-Profit Eliminated = Parent GP
+ Subs GP
- Consolidated GP
