i) To be a subsidiary, a parent does not need to hold 100% of its equity shares. Consolidation involves adding together financial statements, not merely the statements of financial position. In consolidation, a subsidiary and associate are not treated identically. The consolidated balance sheet excludes assets not owned by the group.
ii) Under IFRS 3, acquired contingent liabilities are included in the cost of combination, only if they can be reliably measured.
iii) In determining goodwill in the consolidated statement of financial position, the appropriate calculation is to consider the cost of acquisition, fair value of non-controlling interests, and adjustments for pre-acquisition equity amounts.
i) To be a subsidiary, a parent does not need to hold 100% of its equity shares. Consolidation involves adding together financial statements, not merely the statements of financial position. In consolidation, a subsidiary and associate are not treated identically. The consolidated balance sheet excludes assets not owned by the group.
ii) Under IFRS 3, acquired contingent liabilities are included in the cost of combination, only if they can be reliably measured.
iii) In determining goodwill in the consolidated statement of financial position, the appropriate calculation is to consider the cost of acquisition, fair value of non-controlling interests, and adjustments for pre-acquisition equity amounts.
i) To be a subsidiary, a parent does not need to hold 100% of its equity shares. Consolidation involves adding together financial statements, not merely the statements of financial position. In consolidation, a subsidiary and associate are not treated identically. The consolidated balance sheet excludes assets not owned by the group.
ii) Under IFRS 3, acquired contingent liabilities are included in the cost of combination, only if they can be reliably measured.
iii) In determining goodwill in the consolidated statement of financial position, the appropriate calculation is to consider the cost of acquisition, fair value of non-controlling interests, and adjustments for pre-acquisition equity amounts.
i) To be a subsidiary, a parent does not need to hold 100% of its equity shares. Consolidation involves adding together financial statements, not merely the statements of financial position. In consolidation, a subsidiary and associate are not treated identically. The consolidated balance sheet excludes assets not owned by the group.
ii) Under IFRS 3, acquired contingent liabilities are included in the cost of combination, only if they can be reliably measured.
iii) In determining goodwill in the consolidated statement of financial position, the appropriate calculation is to consider the cost of acquisition, fair value of non-controlling interests, and adjustments for pre-acquisition equity amounts.
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QUIZZ 1-2
Which of the following statement(s) is / are correct with regard to preparation of consolidated financial Statement?
i) To be a subsidiary a parent should hold 100% of its equity shares
ii) Consolidation merely addition together of two Statements of financial position iii) In consolidation a subsidiary and an associate are treated identically iv) Consolidated balance sheet excludes assets not owned by the group
a. ii&iv
b. i&ii
c. None
d. ii&iii
Under IFRS 3, acquired contingent liabilities are:
a. Included in goodwill
b. Included in the cost of combination, only if they can be reliably measured
c. Included in NCI
d . Always included in the cost of combination
At 1 January 20X4 Yogi acquired 80% of the share capital of Bear for $1,400,000. At that date the share capital of Bear consisted of 600,000 ordinary shares of 50c each and its reserves were $50,000. The fair value of the non-controlling interest was valued at $525,000 at the date of acquisition.
In the consolidated statement of financial position of Yogi and its subsidiary Bear at 31 December 20X8, what amount should appear for goodwill?
a. $1,575,000
b. $1,050,000
c. $630,000
d. $450,000
1.400.000+525.000-300.000-50.000=1.575.000 On 1 July 2019, A Ltd pays £870,000 to acquire the entire share capital of B Ltd. The equity of B Ltd on that date consists of ordinary share capital of £400,000 and retained earnings of £210,000. The fair value of the non-current assets of B Ltd on 1 July 2019 exceeds their carrying amount by £35,000. Tax rate 20%. The amount paid for goodwill by A Ltd is: a. £225,000
b. £470,000
c. £232,000
d. £260,000 870.000 - 80%*(400.000+210.00+35.000*80%)=232.000
On 1 January 2009, P Ltd paid £480,000 to acquire 65% of the ordinary share capital of Q Ltd. The
equity of Q Ltd on that date consisted of ordinary share capital of £200,000 and retained earnings of
£150,000. The fair value of the non-current assets of Q Ltd on 1 January 2009 exceeded their carrying
amount by £250,000. Goodwill arising on consolidation has su ered an impairment loss of 40% between
1 January 2009 and 31 December 2016. The goodwill gure which should be shown in the consolidated
statement of financial position at 31 December 2016 is:
a. £36,000
b. £151,500
c. £54,000
d. £78,000
(480.000-65%*600)*60%=54.000
IFRS 3:
a. Allows only the acquisition method or merger method
b. Allows only the unitings of interest method
c. Allows either the unitings of interest method, or the acquisition method
d. Allows only the acquisition method
Applying the acquisition method involves the following steps: (i)Identifying an acquirer; (ii)Measuring the cost of the combination. (iii)Allocating, at the acquisition date, the cost of the combination to the assets acquired and liabilities and contingent liabilities assumed. (iv)Amortizing the goodwill.
a. i – ii
b. i – iv
c. i – iii
d. ii – iii
Negative goodwill should be:
a. Allocated to non-current assets
b. Ignore
c. Matched to future losses
d. Recorded in the income statement
On 1 January 2013, E Ltd paid £560,000 to acquire 80% of the ordinary share capital of F Ltd. The equity of F Ltd on that date consisted of ordinary share capital of £300,000 and retained earnings of £150,000. All of its assets and liabilities were carried at fair value. On 31 December 2016, the retained earnings of E Ltd and F Ltd are £1,870,000 and £65,000 respectively. Goodwill arising on consolidation has su ered an impairment loss of 70% since 1 January 2013. The retained earnings gure which should be shown in the consolidated statement of financial position at 31 December 2016 is: a. £1,708,000 b. £1,662,000
c. £1,725,000
d. £1,645,000
GW= 560.000-80%*(300.000+ 150.000)=200 ⇒ impairment loss = 200*70%=140.000
RE of F at acqui date = 150.000 ; RE of F at 31/12/2016=65.000 ⇒ giảm = 85.000
RE on consolidation FS = 1.870.000 - 85.000*80%- impairment loss of GW=1.662.000
At 1 January 20X6 Fred acquired 75% of the share capital of Barney for $750,000. At that date the share capital of Barney consisted of 20,000 ordinary shares of $1 each and its reserves were $10,000. The fair value of the non- controlling interest was valued at $150,000 at 1 January 20X6.
In the consolidated statement of financial position of Fred and its subsidiary Barney at 31 December 20X9, what amount should appear for goodwill?
a. $870,000
b. $150,000
c. $720,000
d. $750,000
GW= 750.000 + 150.000 -30.000= 870.000
Which of the following statements is not a key feature of the acquisition method?
a.The goodwill being measured as the consideration transferred plus the amount of any NCI interest plus the
fair value of any previously held equity interest in the acquire less the fair value of the identi able net assets
acquired.
b. An acquirer being identi ed for each business combination amortization
c. The acquired identi able net assets being measured at the fair value
d. The cost of business combination being measured at fair value of the net assets received from the acquiree
