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.
Compuation of NCI measured in proportionate share of Subsidiary's identifiable net assets.
Subsidiary net assets at Fair Value
Multiply by: Noncontrolling interest
Fair value of NCI proportionate share in Subsidiary identifiable net assets
xxx
x%
xxx
Priority 2 = If Fair value of NCI is not given or unknown
Acquistion cost
Divided by: Controlling interest
Total fair value of business
Multiply by: Noncontrolling interest
Fair value of Noncontrolling interest
xxx
x%
xxx
x%
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)
FMV of NCI
FMV of old investment in same company acquired ( less than 50%), included
Contingent liabiilty
Total
Less: FMV of Subsidiary Net Assets (100%)
Goodwill/Gain from acquisition
3.)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Consolidated total Assets
Parent total assets (book value)
Subsidairy total assets (fair value) exclusive of goodwill, if any
Goodwill - result from acquisition
Payment - taken from the assets of the acquirer
Consolidated total assets
xxx
xxx
xxx
(xxx)
xxxx
4.)
Consolidated retained earnings
Parent retained earnings before acquisition
Add: Gain from acquistion, if any
Total
Less: Expenses (Direct cost, indirect cost)
Consolidated retained earnings
5.)
Consolidated common stock
Parent common stock before acqquisition
Add: New issued shares to acquire subsidairy @ Par value
Consolidated Common Stock
6.)
xxx
xxx
xxx
Consolidated additional paid in capital
Parent additional paid in capital
Add: New issued share to acquire subsidiay - excess of par
Total
Less: Stock issue cost, if any
Consolidated additional paid in capital
7.)
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Consolidated stockholders' equity
Consolidated common stock
Consolidated additional paid in capital
Consolidated retained earnings
Noncontrolling interest
Consolidated stockholders' equity
xxx
xxx
xxx
xxx
xxx