标题: equity under acquisition method [打印本页] 作者: bcp901 时间: 2011-7-13 15:54 标题: equity under acquisition method
I found two different ways in calculating this:
1. CFAI Mock AM Q46
Total equity = non-controlling interest(40%) + amount paid for 60% interest + acquirer's original capital stock + retained earning
2. CFAI Book, P183, Q26
Total equity = non-controlling interest (50%) + acquirer's original capital stock + retained earning
THE AMOUNT PAID FOR 50% INTEREST IS NOT INCLUDED, WHICH ONE IS CORRECT??作者: DSquaredSlim 时间: 2011-7-13 15:54
This is messing up my head too. I usually use the first method.作者: ayodayo 时间: 2011-7-13 15:54
first one. If you issue new stock/equity to buy this thing then you must include that in your new equity作者: thecfawannabe 时间: 2011-7-13 15:54
Thanks Andrew, so it seems to me:
In case of share purchase, use first one;
In case of cash purchase, use second one, am I right?作者: ppls 时间: 2011-7-13 15:54
yes. can you find any EOCs or anything that illustrate this?作者: hassan 时间: 2011-7-13 15:54
cash is coming off the balance sheet to pay for the difference. that reduces shareholders equity. it's cut and dry. if you issue stock, there is no cash paid out.作者: spreads 时间: 2011-7-13 15:54
I couldn't..so i came ask.
But it totally makes sense:
in a cash offer, ttl assets is reduced by cash paid, and no additional stock is included in SE;
in a stock offer, ttl assets remain unchanged and SE is increased by additional stocks issued.作者: economicz 时间: 2011-7-13 15:54
To elaborate more on the stock offer:
Total Equity = CS + RE + Amount paid (putting 60% and 40% of amount paid is same as lump sum amount paid) however;
If there is good will :
Total Equity = CS + RE + Amount paid + non controlling interest
Under full goodwill method non control interest = (Amount paid / controlled interest) x non controlling interest
Under Partial Goodwill method non control interest = (FV asset - FV liab) x non controlling interest
Under the cash method with no good will, u just multiply non control interest by amount of $ paid.
Edited 1 time(s). Last edit at Wednesday, June 1, 2011 at 10:36AM by Bilal.作者: madaochenggong 时间: 2011-7-13 15:54
>
> Under the cash method with no good will, u just
> multiply non control interest by amount of $ paid.
Sorry, you multiply it by amount of SHE acquired (CS + RE ) x non control interest作者: wxs1986 时间: 2011-7-13 15:54
Within this same item set from CFAI AM, #44:
Are you always supposed to subtract the pro rata amortization of the PPE from the investment account if this information is given? That threw me off.作者: yodacaia 时间: 2011-7-13 15:54
Yeah .. same goes to impairment of goodwill or amortization of license if the Fair value > Cost PPE .. u can to deduct it from Cost + Income x (%) - Div (%)
