Advanced financial accounting - Lecture 45. The main topics covered in this chapter include: cost of investment; less fair value of net assets; fair value; fair value adjustment; less dividend out of pre-acquisition profits;... Please refer to the lecture for details!
Advanced Financial Accounting Lec-45 Main Ahmad Farhan Working-1 Holding % = No of ordinary shares of S Co acquired by P Co X 100 Total No of shares of ordinary shares in S Co Minority % = 100% - Holding % Working-2 Cost of investment Less Fair value of net assets of subsidiary Co accrued by P Co xxx xxx xxx Fair Value This is the value at which assets can be exchanged and liabilities can be settled between two knowledgeable willing in an arms length transactions Working-2 Cost of investment Less Fair value of net assets of subsidiary Co accrued by P Co Net assets +/- Fair value adjustment Fair value of net assets of subsidiary Co x Holding % Goodwill xxx xxx xxx xxx xxx xxx Working-3 Preacquisition Postacquisition Ordinary share capital All - Reserves On the date After the of acquisition date of acquisition Fair value of All adjustment - Total xxx Xxx Holding % of total Parent’s share Parent’s share Minority % of total Minority share Minority share Working-3 Cost of investment in S Co Less Dividend out of pre-acquisition profits Less Parent’s Co share in pre-acquisition equity of S Co Goodwill Less Impairment loss xxx xxx xxx xxx xxx xxx Working-4 All reserves of parent Co Add Parent’s share in post acquisition equity of S Co Less Parent’s share in depreciation effect on fair value adjustment Less Impairment loss of goodwill xxx xxx xxx xxx xxx Working-5 All owner’s equity of S Co Add Fair value adjustment Less Unrealized profit (In case of stop inter Co trading) Less Depreciation effect on fair value adjustment Total Total x Minority % = Minority interest xxx xxx xxx xxx xxx Working-5 MI share in pre-acquisition MI share in post-acquisition MI share in unrealized profit Less MI share in Depreciation effect on fair value adjustment xxx xxx xxx xxx xxx Specific Scenario Intra group loans That will be cancelled Intra group current accounts That will be cancelled and balance if any to shown in good or cash in transit Intra group dividend That will be cancelled to the extent of holding % balance to be shown in the consolidated balance-sheet as payable to minority interest Negative goodwill To be added in the group reserves During the year acquisition of S Co and calculation of pre-acquisition reserve Reserves as on opening date of the year in which the S Co was acquired xxx Add Profit for the year in which S Co was acquired x Pre-acquisition months 12 months xxx Pre-acquisition reserves xxx Working Holding % Minority % Working All opening balance of parent Co Add Post acquisition opening balance of retained profit of subsidiary Co to the extent of holding % Less Impairment of goodwill xxx xxx xxx xxx Working Profit after tax of subsidiary Co Less Unrealized profit Total amount Minority % = Total amount x MI % xxx xxx xxx Specific Scenario Intra group dividend Intra group trading Unrealized profit ...Working-1 Holding % = No of ordinary shares of S Co acquired by P Co X 100 Total No of shares of ordinary shares in S Co Minority % = 100% - Holding % Working-2 Cost of investment... xxx xxx Working-3 Preacquisition Postacquisition Ordinary share capital All - Reserves On the date After the of acquisition date of acquisition Fair value of All adjustment - Total xxx Xxx... total Minority share Minority share Working-3 Cost of investment in S Co Less Dividend out of pre-acquisition profits Less Parent’s Co share in pre-acquisition equity of S Co Goodwill Less Impairment