TOPIC 2: Consolidated SFP - Date of Acquisition (IFRS 10)
Nature of Consolidated Statements
- P must present consolidated fs including all S of parent
Exceptions:
1. A. parent is wholly/partially owned subsidiary of another entity, and all owners do not object to
parent not presenting consolidated fs
B. debt and equity instruments are not traded in public market
C. did not file fs in SEC
D. intermediate parent produces consolidated fs for public use
2. EE benefits are excluded from IFRS 10
3. Required to measure subsidiaries at FVPL
- Consolidated statements are fs of the parent and subsidiaries as a single economic entity
- Consolidation working papers facilitate consolidation of separate statements into a single set
Conditions for Consolidated Statements
- When P owns 50% of voting common stock of another
- Control may be achieved even w/ less than 51%
3 Elements of Control
1. Power over investee
2. Returns from involvement w/ investee
3. Use of power over investee to effect amt of investor’s returns - Link
- Control is ability to direct relevant activities unilaterally
- Qualitative model requiring judgment
Techniques of Consolidated SFP
- Only consolidated SFP is prepared at the date of acquisition
- Eliminate Investment account of parent and SH’s equity accounts of subsidiary
- Remaining A & L of parent are combined with subsidiary
- Intercompany adj and eliminations are made on consolidation working papers in the form of JE, not
recorded in either of the books
Asset Acquisition Stock Acquisition
● Absorbed co is dissolved ● S remains a separate entity
● Assets acquired are recorded in books of ● If less than 100%, noncontrolling interest in
acquirer consolidated SFP
● Consolidated SFP is automatic
● No noncontrolling interest
Note: 100% stock and asset acquisition produce the same consolidated SFP after acquisition.
Asset Acquisition
1. SFP of each co prior to acquisition
2. JE of P’s books to record acquisition
Assets xx
Liabs xx
Consideration xx
3. SFP subsequent to Net Asset acquisition
Stock Acquisition
1. P records acquisition on its books
Investment in S co xx
Cash xx
Consolidated SFP - Date of Acquisition
Acquisition of Wholly owned subsidiary - 100% interest
1. At BV
a. BV of consideration = BV of interest acquired
Note: only SFP is changed to reflect reduction in cash and Investment account for the same amount.
b. P and S Co SFP
Working paper elimination entry
- Investment account eliminated
- SH’s equity accounts eliminated
- Elimination entries are numbered sequentially and entry preceded by an “E”
c. P and S Consolidation Working Paper
- “” not recorded in either accounting records, only a part of working paper
- S’s PIC amounts are always eliminated in consolidation
- Consolidated RE include only of the parent
- Exactly the same as the SFP after asset acquisition
d. Consolidated SFP
2. More than BV
- Consideration > Interest acquired = Goodwill
Equity accounts - S co xx
Goodwill xx
Investment account xx
In Consolidation working paper:
a. Investment in S is eliminated
b. SH’s equity accounts eliminated
c. Goodwill inserted as asset in consolidated column
d. A and L are combined
e. Only P’s equity accounts are included
3. Less than BV - Bargain Purchase
- Consideration < Fv of assets = gain on acquisition
In working paper elimination entry,
a. Gain on acquisition is closed directly to P’s RE
Equity accounts - S co xx
Investment account xx
RE - P co (Gain) xx
Note: income from acquisition not included in working paper bcs closed directly to RE of P.
Acquisition of Partially owned Subsidiary (Less than 100%)
- NCI is an equity not attributable, directly or indirectly, to a parent
- NCI in NI of S is presented in consolidated SCI
- NCI in S’s net assets is shown in consolidated SFP in total and not broken down
- NCI is component of SHE
Measurement of NCI
1. At FV - GW allocated between P and NCI
2. At NCI’s proportionate share of the acquiree’s identifiable net assets - GW only to P
- In measuring NCI at FV, determine acquisition-date FV on the basis of active market prices
- If not available, use other valuation
4. Acquisition at More than FV w/ Adjustment of S accounts
1. Record stock acquisition
Investment xx
CS xx
APIC xx
2. Record acquisition-related costs
RE - P co. xx
Cash xx
Note: Acquisition exp is to be closed directly to RE of P since only SFP are consolidated.
Consolidation Procedures for this case:
1. Compute GW
a. FV of consideration
b. NCI
c. FV of P’s previously held interest in S
Notes: