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Business Combination

Formulas
Chapter 15
1.) Noncontrolling interest

Priority 1 = Fair value of NCI given to the problem but it should not be lower than the NCI - measured at
Non-controlling interest's proportionate share of Subsidairy's identifiable net assets @ Fair Value.

If fair value of NCI given to the problem is lower than NCI measured at proportionate share
of Subsidiary's identifiable net assets use the latter.

Computation of NCI measured in proportionate share of Subsidiary's identifiable net assets.

net assets at Fair Value xxx


Multiply by: Noncontrolling interest x%
Fair value of NCI proportionate share in Subsidiary identifiable net assets xxx

Priority 2 = If Fair value of NCI is not given or unknown

Acquistion cost xxx


Divided by: Controlling interest x%
Total fair value of business xxx
Multiply by: Noncontrolling interest x%
Fair value of Noncontrolling interest xxx

Note: But again the computed Fair value of Noncontrolling interest should not be lower than
than the fair value of NCI in proportionate share in Subsidiary's identifiable net assets.

Note: We apply whichever is higher rule: Part of the new provision, NCI should not have an amount that is
lower than the fair value of NCI measured in proportionate share in Subsidiary's identifiable net
assets. We use whichever is higher.

2.) Result of acquisition


Acquisition cost (Consideration paid) xxx
FMV of NCI xxx
FMV of old investment in same company acquired ( less than 50%), included xxx
Contingent liabiilty xxx
Total xxx
Less: FMV of Subsidiary Net Assets (100%) (xxx)
Goodwill/Gain from acquisition xxx

3.) Consolidated total Assets


Parent total assets (book value) xxx
Subsidairy total assets (fair value) exclusive of goodwill, if any xxx
Goodwill - result from acquisition xxx
Payment - taken from the assets of the acquirer ( xxx)
Consolidated total assets xxx

4.) Consolidated retained earnings


Parent retained earnings before acquisition xxx
Add: Gain from acquistion, if any xxx
Total xxx
Less: Expenses (Direct cost, indirect cost) (xxx)
Consolidated retained earnings xxx
5.) Consolidated common stock
Parent common stock before acqquisition xxx
Add: New issued shares to acquire subsidairy @ Par value xxx
Consolidated Common Stock xxx

6.) Consolidated additional paid in capital


Parent additional paid in capital xxx
Add: New issued share to acquire subsidiay - excess of par xxx
Total xxx
Less: Stock issue cost, if any (xxx)
Consolidated additional paid in capital xxx

7.) Consolidated stockholders' equity


Consolidated common stock xxx
Consolidated additional paid in capital xxx
Consolidated retained earnings xxx
Noncontrolling interest xxx
Consolidated stockholders' equity xxx

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