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Consolidation After Merge

yahya mohamed — Fri, 27 Aug 2010 03:17:47 +0000

If company (A) has a subsidiary(b) during acquisition no goodwill was recognized then the subsidiary (b) was merged with another company resulted for change it’s capital structure , so the Investment of (A) at (b) is now greater than it’s share of new capital of (b) is the difference recognized as goodwill or what

please Help

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Minority Interst

dina — Sun, 22 Aug 2010 09:49:24 +0000

Do I still need to account for a 1% minority interest?
Are receivable from shareholders (part of share capital) eliminated in consolidation or not.

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Financial Statement Consolidation

dina — Sun, 22 Aug 2010 06:45:24 +0000

If the subsidiary was established prior to the parent company, what are the possible complications? I.e. because the Holdings require higher initial capital the management decided that once the subsidiary generates revenue. the revenue can be use to fund the share capital of the parent.
On the establishment of the subsidiary the shareholders put more money over the share capital. can i transfer the excess of shareholders capital in the subsidiary to the parent company? what would be my entry?Please help.

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Acquisition – Business Combination

dina — Thu, 19 Aug 2010 19:06:25 +0000

How do i record an acquisition without investment made by the parent to the subsidiary?

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Gain on Bargain Purchase (IFRS 3)

gordonheard — Thu, 13 May 2010 12:11:41 +0000

Looking for an example of a company that has recorded a gain on a bargain purchase resulting from a business combination. Ideal if it was a mining company.

Thanks

Gord

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Retained losses on Investment in subsidiary

yahya mohamed — Fri, 12 Mar 2010 01:20:56 +0000

If a subsidiary has a retained losses and it increase from year to year

In the parent separate financial statement as Subsidiary was recognized at cost Is there is a need to impairment or write down the cost of the investment of this subsidiary??

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IFRS 3 – Business Combination

admin — Mon, 18 May 2009 07:18:30 +0000

Dear All,

My question is that, in a situation of merger or business combination, where the structure is such that a new company A is formed to take over the businesses of B and C.

The question is whether IFRS 3 Business Combinations is applicable in this case as practically the entire IFRS 3 is based on an Acquirer and an Acquiree which are not present in this structure.

Thanks

Zuhar

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Business Combinations, Consolidation (IFRS 3 and IAS 27) literature

spcboarder — Thu, 19 Mar 2009 22:01:12 +0000

Hello,

I am an Austrian student and I would like to write about consolidation. More specifically I am going to write a comparison between full consolidated corporations and consolidation at equity. As far as I know, equity consolidation exists as term in german, but not in English. In English it is referred to as elimination of balances according to IAS 27 debt consolidation. IFRS 3 – Business Combinations is going to be relevant for me as well.

I am in the need of some good literature to read up on the topic. I would like to write my master’s thesis in English and therefore it is quite difficult to find english according literature in university libraries.

However, if you could recommend me a good book on the topic, I am going to buy it. I just want to avoid buying a book which is not connected to my topic at all.

So far I am reading german literature and “A Global Guide to Accounting for Business Combinations and Noncontrolling Interests Application of the U.S. GAAP and IFRS Standards” by PriceWaterhouseCoopers.

Thanks,

Willi

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How to account intragroup trading under Business combination

admin — Tue, 10 Mar 2009 17:16:37 +0000

Dear all,

I need clarification with regard to how to treat an intra group trading b/n parent and subsidiaries group accounts during preparation of consolidated statement of financial position as well as income statement. I always confuse and need a clear guideline on how to treat it.

For instance

the subsidiary sold to the parent in the post acquisition period for an amount of $8million. The subsidiary made a mark up on cost of 40% on the sales. The Parent sold $5.2 million(at cost to the parent) of these goods. How should I adjust this situation when preparing consolidated Statement of Financial Position.

I need your advice and where can I find the standard which clearly show treatment of intra group trading.

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Loss / profit from joint venture / subsidiary

admin — Sat, 14 Feb 2009 08:54:30 +0000

Dear Experts,

Do we need to pass an entry for share of loss / profit in joint venture in the books of subsidiary stand alone books FS and also the same in the books of parent company stand alone books.

or to be considered only for out of books consolidation purposes.

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In case of newly established Subsidiary

ca.lokeshjain — Wed, 04 Feb 2009 08:32:49 +0000

In case of newly established subsidiary, which have not stared his commercial activities and in construction phase, is it require to consolidate it or we can show it on cost. Plz tell me What will be the right treatement

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Acquisition accounting

ifrslist — Sun, 14 Dec 2008 22:28:00 +0000

Dear all,

I have a question in relation to acquisition accounting in accordance with
IFRS3. In this case a parent company A acquires all the shares in
subsidiary company B for (say) 50M. This cost price represents a goodwill
over the fair value of the assets and libailities assumed of 15M. Where
should I record the 15M goodwill? Is this in the subsidiary company B or
in parent company A?

Based on IAS21, p. 47, I would say in the sub.
All the best, Farah

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As per IFRS 3 Goodwill acquired on consolidation is supposed to be shown
in the Consolidated account of the parent company in this case A.

Benaya

It is recognised in neither the Parent company nor the sub( Seperate Financial Statements). Goodwill is only ever recognised seperately in the consolidated financial statements.The calculation of goodwill based on Cost price over the net assets fairly valued is perfectly correct. However please note with the new IFRS3 & IAS27, the amount of goodwill can also be calculated based on the “full goodwill” method.
Shivan

There are two legal entities: P Parent S Subsidiary
Remener records are kept in Parent company to take account of its investment in S;
In the books of the parent company P under Non current Assets it will record Inventment in S as $50M
Consolidation is done to show the financial position of the group; as though it was one entity.

At this point goodwill $15m shall be recognised as purchased goodwill in the consolidated accounts. Neither P nor S will show records of goodwill.
The goodwill can be armotised over a period as prescribed by the directors and managemet or it can be written off to consolidated retained earnings.
Remember $50m is the cost of investment in S. It must be used to arrive at the goodwill figure of $15M as a consolidation item. The underlying figure of $35m
represents net assets of the Subsidiary S at the date of acquisition.

Dear All,

Shivan is perfectly correct according to the mail below. Goodwill in this situation can not be recorded in any of the entity’s book (parent and subsidiary) but rather on the consolidated statement of financial position. Please also refer to the new IFRS3 to get update on the full goodwill approach.

William

Hi Henry,

I agree with you on all the other information provided in your mail but not when you said goodwill should be amortized as determined by the directors. According to IFRS standards, goodwill should not be amortized but rather reviewed for impairment annually.

it should be shown in the parents group accounts as a nca ant annually tested for impairment not amortised

Hi Martijn,

As per IFRS3 itself, I suggest you use the ACCA search engine and type IFRS3, you’ll have all the explanation you want or go to the link below

http://www.accaglobal.com/members/publications/accounting_business/cpd/IFRS3

Cheers

Hi martijn,
The structure is such that, consolidation is consolidation of 2 balance sheets to find the consolidated assets and liabilities and networth.

In the standalone balance sheet of Holding:
Investment is shown as cost in the asset side of the Balance Sheet. Unless there is a change in carrying amount.
To keep it simple, lets say that carrying cost IS cost of acquisition, that is, the consideration paid, in your situation GBP 100.

In the subsidiary’s standalone BALANCE SHEET, nothing (NOTHING MOVES).
SHARE ARE ACQUIRED FROM SHAREHOLDER not SUBSIDIARY. Maybe from the markets or by approaching the shareholders.

Consolidated statement line by line addition shows goodwill.

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Effective date of business combination

ifrslist — Thu, 28 Aug 2008 15:28:00 +0000

Suppose Entity A acquires Entity B in a business combination and all the considerations have been completed by 31 December 2007 except that government approval which was still pending as at year end. Should entity A consolidate Entity B as at 31 December 2007?

Regards,

Nyasha

I believe the answer lies in the issue of control. If the acquirer still does not have control, i.e. voting rights, directorship, active management, no consolidation should be done until Control is obtained. In the meantime, the Acquirer can book in the investments in subs as a prepayment. Hope this helps.

Regards

Leslie

Hi,

Let us look into the three types of financial reporting:
1) Management Set of Accounts (MSA)
2) Statutory Accounting
3) Tax Accounting

Considering your scenario, legally the account cannot be merged in statutory and tax books since it was not approved by the law / Govt., hence it can be consolidated in MSA and presented for the management review.

On the other hand, M&A cost as of that date can be represented in Statutory and Tax books of Entity A with the additional notes about Entity B.

Regards
Prasad

I agree with Leslie. I had a client last year where control was obtained on acquisition but certain percentage of shares were in an escrow account as the takeover company was listed and an open offer was made under the local securities exchange guidelines. For group consolidation, control had been established as required under IAS 27 and for local reporting, adequate notes were given to indicate that 51% control of voting rights existed.

Just make sure that the facts are disclosed adequately and the anticipated timelines for regulatory compliance.

If the approval was obtained before the preparation of the financial statements, it would have to be consolidated. If not and the government approval is that important AND there is no way of knowing whether it will be yes or no the company should not consolidate, but provide pro-forma consolidated statements in the notes (similar to showing the effect of all year consolidation of new acquisitions in the year),

Kind regards,

Henk

In my humble option you should consolidate if you obtain full control over subsidiary (ie. goverment approval) before you made up the financial statment.

So if you go public with you financial statement on April 2008 and the goverment approval was given in March 2008 you should consolidate.

Regards,

Jakub

Yes unless prohobitaion in local laws.

Thank Your & Best Regards

AMIR

Dear Nyasha,

As per my knowledge of IFRAS and IAS conslolidation has been accured on 31-Dec-07 therefore consolidated financial statements should be prepared on the basis of date of acqueisition. if local laws do NOT restrect

Tha

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IFRS 3 Business Combination

ifrslist — Thu, 28 Aug 2008 15:12:00 +0000

Dear All,

one of our Client has purchased a 100 % interest in a Subsidiarywhich is loss Making…

He has passed the following entry in their own books

Goodwill DR 120,000

Investment CR 20,000 (Equity of subsidiary)

Payable to subsidiary 100,000 (purchase price)

My question is can Investment AC be -VE at initiation. and as far as i remember the initial recognition of an asset should be at its cost.and my plea to the Client is that the entry should be

Investment DR 100,000

Payable 100,000

and goodwill be shown in Consolidated ACs.

Kindly comment….and correct me if i am wrong.

Regards

I think the entry you proposed is correct as goodwill from acquisition would only be shown in consolidated a/c.

If it is a loss making sub the main advise to your client is that he has to right away have a plan for impairment testing of the investment, I think that is the main issue

If Your client bought a business (and not a company) in its account receives Fixed Assets, Current Assets and Creditors of the business combination, so

Fixed Asset 100.000

Current Assets 20.000

- Creditors 100.000

Goodwill 80.000

The treatment by client is very improper.

The asset should be shown at initial cost and thereafter goodwill may be shown in consolidated financial statements.

Regards

Your cllient is permitted to show the investment in its separate financial statements valued at cost or in accordance with IAS 39. Unless of course it has been classified as held for sale in which case IFRS 5 would apply.

In the consolidated financial statements, IFRS 3 would be applicable in determining the goodwill.

Please note that the revised IAS 27 and IFRS 3 can be early adopted and the treatment for goodwill recognition would be impacted if your client early adopts IFRS 3 in which case IAS 27 revised would also have to be early adopted.

Your plea is correct.

Thank you very much for ur guidance..Your thoughts were very precious to me.

Regards

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