Consolidation

Question 1

What are the rules for the measurement of NCI?

Answer 1

Measured at the higher between fair value or (FVANIA x NCI %)

If fair value isn’t given, use implied fair value

Question 2

How to find TVGU when it comes to consolidation?

Answer 2

Consideration Transferred
Add: NCI
Add: PHI
————————
TVGU

Question 3

How to compute for implied fair value of NCI

Answer 3

(CT - Control Premium)
Divide: CI %
Mult: NCI %
———————-
Implied Fair Value

CT = Consideration Transferred

Question 4

What are the main differences between net asset acquisition and stock acquisition?

Answer 4

1. Existence of NCI
2. Adding NCI to Conso SHE
3. WPEE’s (Working Paper Elimination Entries)

Question 5

What are the different WPEEs?

Answer 5

1. WPEEs for SHEs
2. WPEEs for FV Changes of Assets (Including Preexisting Goodwill)
3. WPEEs for Goodwill or GBP
4. Dividends from Subsidiary
5. Amortization of UVA and OVA
6. GW Impairment Loss
7. Recognition of NCINIS

Question 6

What are the rules of measurement for PHI?

Answer 6

1. Measured at FV
2. If no FV, measure at Implied FV

Question 7

How do you find Consolidated Net Income?

Answer 7

NI - P
NI - S
(Divs. from Subsidiary - P’s Share)
+- Amort of Purch Diff
+- Impairment Loss on GW
+ Gain on Bargain Purchase
—————————
CONSO NI

Question 8

How do you find Consolidated Retained Earnings?

Answer 8

Conso RE, beg
CNI - P
(Divs Declared by P)
———————–
Conso RE, end

Question 9

How do you find NCINAS? Or NCI, end?

Answer 9

NCI, beg
CNI - NCI
(Divs paid by subs - NCI’s share)
———————-
NCI, end

Question 10

What are the journal entries for elimination of Subsidiary’s SHE (WPEE #1)?

Answer 10

Dr OSC - Subsidiary
Dr RE - Subsidiary
Cr Investment in Subsidiary
Cr NCI

Question 11

What are the journal entries for fair value changes (WPEE #2)?

Answer 11

Dr UVA
Cr OVA

Investment in Subsidiary and NCI are journalled based on differences

Question 12

What are the journal entries for recognition of Goodwill or GBP (WPEE #3)?

Answer 12

IF GOODWILL:
Dr Goodwill
Cr Investment in Subsidiary
Cr NCI

IF GBP:
Dr Investment in Subsidiary
Cr GBP

Question 13

What are the journal entries for elimination of subsidiary’s dividend income (WPEE #4)?

Answer 13

Dr NCI
Dr Dividend Income - S to P
Cr RE - Subsidiary

Question 14

What are the journal entries for amortization of UVA or OVA (WPEE #5)?

Answer 14

Dr Depex
Dr UVA
Cr Dep Ex
Cr OVA

Question 15

What are the journal entries for Goodwill Impairment (WPEE #6)?

Answer 15

Dr Impairment Loss
Cr Goodwill

Question 16

What are the journal entries for recognition of NCINIS (WPEE #7)?

Answer 16

Dr NCINIS
Cr NCI

Question 17

Where is the investment in subsidiary recognized?

Answer 17

Parent’s Separate Books

Note: Account is eliminated in Conso FS