Intercorporate taxonomy, review attention, acquired, interest, account, records

luckygiftvn

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.

wilslm

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)

maryli

Dreary, thanks for putting it together. Got a question on the partial goodwill
you had it

Partial Goodwill: Purchase price - 90% x BV(sub) - 90% x [FV(sub) - BV(sub)] = $810M -0.90($500M) - 0.90 ($100M) = $270M.

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).

spreads

yeah, I'm fairly confident this is correct, and this took me a bit to piece together.

redskins44

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.

tobeornottobe

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.

Pegasus2008

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.

19831985

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

economicz

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

kingstongal

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?