AC15 Full and Partial Goodwill PDF

Preview

Summary

partial good will...

Description

Full and Partial Goodwill Problem solving exercises (test bank) Company A and Company B – Full and Partial Goodwill Company A acquires 80% of Company B for P5,000,000, carrying value of Company B net assets at time of acquisition being P3,000,000 and fair value of these net identifiable assets being P4,000,000. Required: a. Goodwill arising on consolidation is to be valued on the proportionate basis or “Partial” Goodwill. b. Using the same information above, the amount of non-controlling interest arising on consolidation is to be valued on the proportionate basis or “Partial” Goodwill: c. Using the same information above, the amount of goodwill arising on consolidation is to be valued on the full (fair value) basis or “Full/Gross-up” Goodwill: d. Using the same information above, the amount of non-controlling interest arising on consolidation is to be valued on the full (fair value) basis or “Full/Gross-up” Goodwill: Solution:

Consideration transfer FVNAA Goodwill a b c d

1,800,000.00 800,000.00 2,250,000.00 1,250,000.00

Consolidated 6,250,000.00 4,000,000.00 2,250,000.00

80% Parent 5,000,000.00 3,200,000.00 1,800,000.00

20% NCI 1,250,000.00 800,000.00

Full and Partial Goodwill Problem solving exercises (test bank) Pine Company and Shine Company - Full and Partial Goodwill Pine Company acquires 15 percent of Shine Company’s common stock for P1,000,000 cash and carries the investment using the cost method. A few months later, Pine purchases another 60 percent of Shine Company’s stock for P4,320,000. At that date, Shine Company reports identifiable assets with a book value ofP7,800,000 and a fair value of P10,200,000, and it has liabilities with a book value and fair value of P3,800,000. The fair value of the 25% noncontrolling interest in Shine Company is P1,800,000. Required: a. Goodwill arising on consolidation is to be valued on the proportionate basis or “Partial” Goodwill. b. Using the same information above, the amount of non-controlling interest arising on consolidation is to be valued on the proportionate basis or “Partial” Goodwill: c. Using the same information above, the amount of goodwill arising on consolidation is to be valued on the full (fair value) basis or “Full/Gross-up” Goodwill: d. Using the same information above, the amount of non-controlling interest arising on consolidation is to be valued on the full (fair value) basis or “Full/Gross-up” Goodwill: e. Using the same information above, the amount of gain or loss should be recognized when the additional shares are acquired: Solution:

Consideration transfer FVNAA Goodwill a b c d e

600,000.00 1,600,000.00 800,000.00 1,800,000.00 80,000.00

Consolidated 7,200,000.00 6,400,000.00 800,000.00

75%

25%

Parent 5,400,000.00 4,800,000.00 600,000.00

NCI 1,800,000.00 1,600,000.00

1st issuance 2nd issuance Total FV of CT difference

1,000,000.00 cost method 4,320,000.00 5,320,000.00 5,400,000.00 80,000.00

Full and Partial Goodwill Problem solving exercises (test bank) Company A and Company B – Full and Partial Goodwill On September 1, 2019, Company A acquires 75% (750,000 ordinary shares) of Company B for P7,500,000 (P10per share). In the period around the acquisition date, Company B’s shares are trading at about P8 per share. Company A pays a premium over market because of the synergies it believes it will get. It is therefore reasonable to conclude that the fair value of Company B’s as a whole may not be P10,000,000. In fact, an independent valuation shows that the value of company B is P9,700,00 (fair value of Company B). Assuming that the fair value of the net identifiable assets is P8,000,000 (carrying value is P6,000,000). Required: a. Goodwill arising on consolidation is to be valued on the proportionate basis or “Partial” Goodwill: b. Using the same information above, the amount of non-controlling interest arising on consolidation is to valued on the proportionate basis or “Partial” Goodwill c. Using the same information above, the amount of Goodwill arising on consolidation is to be valued on the full (fair value) basis or “Full/Gross-up” Goodwill: d. Using the same information above, the amount of non-controlling interest arising on consolidation is to valued on the full (fair value) basis or “Full/Gross-up” Goodwill: Solution:

75% Consideration transfer FVNAA Goodwill a b c d

1,500,000.00 2,000,000.00 1,700,000.00 2,200,000.00

Consolidated 9,700,000.00 8,000,000.00 1,700,000.00

Parent 7,500,000.00 6,000,000.00 1,500,000.00

25% NCI 2,200,000.00 2,000,000.00 200,000.00...