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BUSINESS
COMBINATIONS:
DATE OF ACQUISITION +
SUBSEQUENT TO ACQUISITION
Based on lectures by Rodiel C. Ferrer, CPA, Ph.D.
(CPAR)
GENERAL CONCEPTS:
BUSINESS COMBINATION AT DATE OF ACQUISITION
liabilities and equity of the acquirer right after the acquisition can
be computed as follows. The items shall be discussed on
subsequent sections
Total acquirer assets, at book value
ADD: Total acquiree assets, at fair value
ADD: Goodwill
DEDUCT: Cash, non-cash assets paid
DEDUCT: Expenses paid
Total assets
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
GOODWILL / GAIN ON
BARGAIN PURCHASE OPTION
Goodwill results if the acquirer pays more than the fair value of
the net assets of the acquiree. Otherwise, a gain on bargain
purchase option emerges. Goodwill is not an identifiable asset,
and therefore not recorded by the acquirer if the acquiree has
preexisting ones (and thus not included in the formula above)
In cases that the business combination involves acquisition of
two or more acquirees, goodwill from the acquirees is not
combined. If theres a gain on one acquiree, it is not netted
against the goodwill of the other acquiree
Goodwill/gain from the combination can be computed with
either of the following formulas:
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
NON-CONTROLLING INTEREST
AND THE D&A SCHEDULE
xx
xx
xx
xx%
xx
xx%
xx
Total
(f)
(b)
(g)
Purchase price
(a)
(c)
xx
NCI
(e)
(d)
xx
PREVIOUSLY-HELD INTEREST
xx
xx%
xx
xx%
xx
GENERAL CONCEPTS:
BUSINESS COMBINATION SUBSEQUENT TO ACQUISITION
COMPUTATION OF CONSOLIDATED
NET INCOME (CNI)
OVER/UNDERVALUATION OF
ASSETS
INTERCOMPANY SALES:
UPSTREAM AND DOWNSTREAM SALES
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CONSOLIDATED FINANCIAL
STATEMENTS
xx
xx
xx
xx
Parent COGS
ADD: Subsidiary COGS
DEDUCT: Intercompany purchases, at selling price
ADD: UPEI, upstream and downstream
DEDUCT: RPBI, upstream and downstream
Consolidated cost of goods sold
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
Parent expenses
ADD: Subsidiary expenses
ADD: Amortization of depreciable asset undervaluation
DEDUCT: Amortization of depreciable asset overvaluation
ADD: Realized losses from depreciable assets
DEDUCT: Realized gains from depreciable assets
Consolidated expenses
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
xx
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