Less than 20% (with no influence ---> classify as HtM, AfS, or HfT, and pay attention to how you account for interest/dividend and G/L.
Between 20%-50% (with influence) ----> use equity method (only?)
Joint Ventures ----> proportionate consolidation (IFRS), or Equity Method (U.S.).
If > 50% --------> use acquisition method (only?), some in the past used pooling, so you need to be aware of its impact. In acquisition, IFRS records assets+liabilities at FV. U.S., only acquired stuff at FV. If pooling was used, then assets+liabilities recorded at V.
If having control over SPE, use consolidation...if no control (?)
Agree or disagree, please.作者: flyinggirl 时间: 2011-7-13 14:28
Is full consolidation same as 100% proportionate consolidation?作者: wizofoz 时间: 2011-7-13 14:28
"In acquisition, IFRS records assets+liabilities at FV. U.S., only acquired stuff at FV."
Is this correct?作者: firat 时间: 2011-7-13 14:28
For SPE issues
IFRS:
You will need to have control to consolidate. Proper guidelines are not given. Indicators of control:
SPE activities are conducted for the benefit of sponsoring entity
It has decision making powers to obtain benefits
It is able to absorb risk and rewards of SPE
It has residual interest in SPE
GAAP:
Must consolidate if primary beneficiary. Primary beneficiary is one who absorbs major losses, receives major returns or both.
If one entity takes major losses and other entity takes major returns, then entity absorbing major losses must consolidate.
"Is full consolidation same as 100% proportionate consolidation?"
Well then it wouldn't remain proportionate.作者: kingstongal 时间: 2011-7-13 14:28
Correction:
Bought 90% of company with net assets BV = $1.2M, FV=$1.5M, but FV at acquisition date = $1.6M, and paid $500k.
Goodwill under acquisition method = $1.6M-$1.5M = $100k.
This is similar to Example 9, page 44 of FRA, where they ignored the 90% acquisition!
Can someone summarize how you account for goodwill?作者: economicz 时间: 2011-7-13 14:28
Dreary Wrote:
-------------------------------------------------------
> Please confirm.
>
> Bought 30% of company with net assets BV = $1.2M,
> FV=$1.5M, and paid $500k.
>
> Goodwill under equity method is $500k - 0.30*$1.2M
> = $140k
>
> If you bought 90% of company, then Goodwill under
> acquisition method = $1.5M-$1.2M $300k.
>
> Is this correct?
Goodwill under equity method is as follows:
Purchase price = 500k
Acquired equity = 120 x 0.3 = 360k
Excess purchase price = 140k (500-360)
Attributable to other assets = (1.5-1.2)x0.30 = 90k
Goodwill = 140-90 = 50k
Goodwill under acquisition.
Under Partial Goodwill
You will need to how much the company was purchased for its share of 90%
Under Full Goodwill
You will need to know what is the fair market value of the subsidiary作者: 19831985 时间: 2011-7-13 14:28
Dreary Wrote:
-------------------------------------------------------
> Correction:
>
> Bought 90% of company with net assets BV = $1.2M,
> FV=$1.5M, but FV at acquisition date = $1.6M, and
> paid $500k.
>
> Goodwill under acquisition method = $1.6M-$1.5M =
> $100k.
>
> This is similar to Example 9, page 44 of FRA,
> where they ignored the 90% acquisition!
> Can someone summarize how you account for
> goodwill?
Goodwill under acquisition.
Under Partial Goodwill
500k - 0.90 x 1.5 = 50k
Under Full Goodwill
1.6-1.5 = 100k作者: Pegasus2008 时间: 2011-7-13 14:29
Finally I got a hold of this:
Subsidiary's market value (market cap for example) MV(sub) = $900M.
FV (net assets) = $600M.
BV (net assets) =$500M.
Parent buys 90% of sub and pays $810M (90% of MV(sub).
Full goodwill: MV(sub) - FV(sub) = $900M - $600M = $300M.
Minority Interest in Equity section = 10% x MV(sub) = 10% x $900M = $90M.
Partial Goodwill: Purchase price - 90% x [FV(sub) - BV(sub)] = $810M -0.90 ($100M) = $72M.
Minority Interest in Equity section = 10% x FV(sub) = 10% x $600M = $60M.作者: tobeornottobe 时间: 2011-7-13 14:29
Folks, this is work in progress, sorry. Correction to partial goodwill:
Finally I got a hold of this:
Subsidiary's market value (market cap for example) MV(sub) = $900M.
FV (net assets) = $600M.
BV (net assets) =$500M.
Parent buys 90% of sub and pays $810M (90% of MV(sub).
Full goodwill: MV(sub) - FV(sub) = $900M - $600M = $300M.
Minority Interest in Equity section = 10% x MV(sub) = 10% x $900M = $90M.
Partial Goodwill: Purchase price - 90% x BV(sub) - 90% x [FV(sub) - BV(sub)] = $810M -0.90($500M) - 0.90 ($100M) = $270M.
Minority Interest in Equity section = 10% x FV(sub) = 10% x $600M = $60M.作者: redskins44 时间: 2011-7-13 14:29
Dreary Wrote:
-------------------------------------------------------
> Folks, this is work in progress, sorry.
> Correction to partial goodwill:
>
> Finally I got a hold of this:
>
> Subsidiary's market value (market cap for example)
> MV(sub) = $900M.
> FV (net assets) = $600M.
> BV (net assets) =$500M.
>
> Parent buys 90% of sub and pays $810M (90% of
> MV(sub).
>
> Full goodwill: MV(sub) - FV(sub) = $900M - $600M =
> $300M.
> Minority Interest in Equity section = 10% x
> MV(sub) = 10% x $900M = $90M.
>
> Partial Goodwill: Purchase price - 90% x BV(sub) -
> 90% x = $810M -0.90($500M) - 0.90 ($100M) =
> $270M.
> Minority Interest in Equity section = 10% x
> FV(sub) = 10% x $600M = $60M.
Looks good to me.作者: spreads 时间: 2011-7-13 14:29
yeah, I'm fairly confident this is correct, and this took me a bit to piece together.作者: maryli 时间: 2011-7-13 14:29
Dreary, thanks for putting it together. Got a question on the partial goodwill
you had it
Why did you have this part "90% x BV(sub) - 90% x [FV(sub) - BV(sub)]" Instead of just 90% (FV of Sub)? As it ends up to be the same number (540).作者: wilslm 时间: 2011-7-13 14:29
Not sure if it's always the same. Usually, I've seen it done like this:
Partial Goodwill: Purchase price - 90% x BV(sub) - 90% x [FV(PP&E) - BV(PP&E)]
..where you they look at PP&E only...so, if you consider the change in all identifiable assets (not just PP&E), then I guess you can just use Partial Goodwill: Purchase price - 90% FV(sub)
