Flashcards in Deck 8 Deck (18):
Distributions that exceeds investor's share of the investee's retained earnings are (cost method):
Return of capital/reduce basis
Investment in investee (cost method)
Only adjusted to FV
GAAP rules for equity method accounting:
BASE: beginning balance, add share of earnings, subtract share of dividends paid and amortization = ending balance
Goodwill for equity securities =
Excess purchase price over FV of net assets
Mark to market:
Mark up to FV
Joint venture investments are usually accounted for using what method?
Change from cost method to equity method:
Adjust retrospectively (apply equity method for prior periods but use the prior period's old percentage)
When does a company consolidate financial statements?
Have control (over 50%)
Two examples when a company has control but wouldn't be able to consolidate?
When the sub is is reorganization or is bankrupt
Gains/losses from fixed assets are always recognized at:
NBV in the period incurred
Difference between calculating NCI under GAAP and IFRS
GAAP: FV of sub x NCI% ------- IFRS: FV of sub net assets x NCI%
Difference between calculating goodwill under GAAP and IFRS
GAAP: FV of sub - FV of net assets ------IFRS: Acquisition cost - FV of subs net assets
Items that will be adjusted during consolidation (CAR IN BIG)
C/S, APIC, RE...Investment in sub, NCI...B/S of sub adjust to FV, Identifiable intangible assets record at FV, Goodwill
Difference between legal fees under the equity method and consolidation (capitalize or expense)
Equity method: capitalize; Consolidation: expense
In process R&D should be carried as:
An asset, separately from goodwill
Acquisition price > FV of net assets acquired =
Can goodwill be amortized?
Only for private companies (max 10 years)