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Flashcards in Consolidation Deck (22):
1

Hedge for foreign currency sales or purchase gain or loss treatment?

Depends on the effectiveness, the effective portion record in OCI, the ineffective portion report in NI.

2

Treatment for borrowing foreign currency from different foreign entity to hedge the investment in S?

borrowed funds gain report in net income; investment in S financial statement translation gain or loss repost in OCI
So reporting in NI or OCI depends on which number is bigger

3

What interco transactions need to be eliminated?

P-S, S-P, and S-S

4

If interco inventory is not eliminated, what is going to be of overstated?

Both consolidated income/loss
Overstated income is from goods were sold at higher price > cost within affiliate, loss is from selling price is lower

5

What controls the determination of the accounts and amounts for the entry to record the consolidation?

Legal form of a business combination deters the entry accounts, and the accounting method deters the amounts at which entry will be made.

6

Under what business combination, the acquiring entity recognize acquired entity on book?

What about assets and liability that is recognized on acquiring entity?

Acquisition

Merger and consolidation

7

Merger, consolidation and acquisition differences

Merger, two firms combined into one, one entity ceased existence and one surviving entity, 2-1

Consolidation: two or more entity combined into one new entity, two or more entity ceased exist

Acquisition: one entity gain controlling interest of another, both all exist as separate legal entity


8

The method the parent company uses to prepare consolidated financial statement will only affect?

The consolidation process, but the end result consolidated f/s will be the same either way.

9

Where the consolidation process takes place? Parent or subsidiary?

Neither! On worksheet standalone of either book

10

What are the possible Acquisition date for business combination?

The acquisition date can be before, on or after the closing date, which means the acquisition date is also the closing date.

11

The maximum length of measurement period for business combination?

One year from the acquisition date

12

What does ASC 805 say about business combination?

Differences of ASC 805 and IFRS #3?

Acquisition accounting treatment only included manufacturing entity by a holding company, combination between financial institutions, foreign entity by a U.S. Entity, acquire a group of assets that constitute a business

Difference in areas of scope, definition of control, how FV, contingencies, employee benefit obligations, non-controlling interest and goodwill, as well disclosure requirement.

13

What accounting method is allowed under GAAP?

Characteristics of concept of a "business" for purpose of business combination?

Only acquisition method

Is an integrated set of activities and assets that is use inputs and processes to provide benefit for its owners, members and participants.

But it does not have to be a separate legal entity

14

Continent obligation

When acquired company meet earning target, parent pay additional amount, recognized on the date of acquisition as a liability, And Include in purchase price

If acquired company end up not meeting the earnings target, parent co will recognize a contingent gain

All record at fair market value on date of acquisition

15

Share based payment award transfer

Employees have options, they will receive compensation, p bought s, and compensation still need to be paid, but amount will be different.
When transfer is required and relate to pre-combination services, cost is part of the acquired business

If it's required, but relate to post combination (after date of Combination),expense it

All other acquisition fees are expense as incurred, not part of acquisition cost, but when issue stock or bond to actuaries business, the issuance cost for stock will be a deduction to PIC, for bond will be amortized, still not part of the acquisition cost

16

In a business combination, is capital lease going to be reclassified?

No,it the AFS, trading or derivatives for speculate purpose might all be reclassified.

17

After a acquisition and until it settled, how to measure a continent liability and asset arise from business combination?

Liability measured and reported at the higher of amount reported on the acquisition date the amount would be recognize. Over report liability!

Asset will be measured at the lower amount reported on acquisition date or the best estimate of its future settlement amount. Under report asset!

( use specific post-combination accounting requirement)

18

Provisional amount in business combination.

Disclose why the accounting is incomplete
And the amount of adjustment made during the period

19

Business combination identify circumstances that require extensive disclosure in the period of combination include?

The existence of NCI and achieving control in step acquisiton.

20

Goodwill recognized in combination need to disclose what types of info?

Description of how to derive the goodwill
Portion that will be deductible for tax purpose
Amount of goodwill allocated to each reporting segment.

21

Inter company transaction between two subsidiaries that will consolidate with the same parent co, what is the treatment of the transaction in preparing consolidated f/s?

Do NOT NEED TO BE Eliminated.

22

When given p and s partial balance sheet and income statement, after the interco inventory sales at the same mark up from p to s as the same as outside party, asking what is the payable from s to p.

Check the p and s accounts receivable, both add together and the difference of that with the number on the consolidate balance sheet will be the answer.