Reading 9 Intercorporate Investment

University:
California State University, Northridge
Course:
ACCT 220 | Introduction to Financial Accounting
Academic year:

2020
Views:

262

Pages:

55
Author:

SophGr

dPage No. IDate 1 / Sep 22SAsnutwoV triot *winnpolt9AAN$29711to(togoetonoition1919/29/2011=Readingno ercorporae91.07Investmenttamifiagic"ma29199]godpaidsonwiloqnitransvlovalM9.1dotClassificationActive TbirgtomPassive1989/2190appropriate Subsidaries istalFinancialAssetAssociatesBiz CombNo Significant ControlSignifigant influnceSignificant Control(<20%)(207- - 50%)ijiapia(More than Sor.)friendneyHoridmalsidAmortizedFUTOCIFUTPLEquityConsolidationAcquistionAmortizedFVFVBSit2gidz79nwoMethod19nwopropoted stongorgiaandsustrolingRGRGRlu G ISanilabingfloo21-UGOCI- 2Page No.Date / /SS paJoint VentureBoth IFRS & GRAP ReqEquity MethodHowerver proportionateConsolidation isallowedunderfale circumstancesVariesShared control2)Significant influenceCan --BOD representInfluenceInvolvement in policy makingDependence on techFinancingMaterial inter- Companytransaction22,OperatingInter chage of managrialpersonnelsidAmt and timing of divrunniInfluencebitro tapsilinpidFAdifingiaNot significantWitne towifiapierof,Associate - SignificantBContiBiz Com bination - ControlingNote:utilipsthe appropriate% of ownership is typicaly used to determinatiis only a guideline.category . Howerever , + the owner percentageon the investor's ability to Iltimately influence the or a Category cortrol the is basedinvestee .Influency is the Keyw Page No 3Date / /M. 9.2Financial AssetinoitibnaTheclassificationforequityanddebtIgboM!8thworsHd(cGAAP&FRSarethesame7)tastwolfdeas3 TypesAmortizedCostiving19/1''s7.IntGgipFV PLfloologining noFV OCI2tollIAmortizedlostConlydebtmSecurityiesJonizonYTMto = 18%YTMt=12Eg N =12Coupan:=12-n1/7 ForThis doesnat mattedgiftbillstotzt3BS:1730 touchBS 741Jein+922ABS:71215 : (730 X187.) =131319tmsmoots1932Aor-922A1.120+ (741 -730) =13110msignoqueto10%tveIntent&AbilitytoholdmaturitystirutomInitialRecognitionVMespandIFRS.-recognized atfairvalueforGAAP--recognizedatintialpricepaidpurchased price Page No.aDate//Condition :How asset is managedIBusinessModeltest :-moitoilizedDebt securityareforcollectContractualCFs99ANare paysolelyInt&plincipal2Cash FlowCharacteristictestThecontractualCFsareeitherprincipalof invest,on principal onlyV7Note :Int t PrincipleBusinessmodel:mustbecollectContractualCFSAccountingsameBCarriedontheB/SatamortizedCostAsset disc28Asset Prem:BlsI/SBlsitsAssetInt incomeToAssetIncome htPar atCoupontDiscmaturityamortizedCoupon - premamphtiChangesInMVnotrecoginzedunlessIgnorechangesinFVimpairedpitialNotshowninBlsmightbeinbingboutereats -2871swinglossing 9AAN92129 IPage No. 52ndDate//Sep2022amortizedCostonBlsReportedatusingeffective.tointRatemethodeCunlessobjectiveeviden-exists)bsen tonofimpairmenttoyou/DarePILIntIncome&babbodanst923A2FUPLC3M5,029fringsstings -OnB/SatF.V.wort507IdIntdivincomeRall 4aGLCon1/59/17lot =Coupontdisc-premHeld for(as lTradingEAFVVsDEarningsA Equity(- 28Can ReduceVotatility&InconsistentlyDesignatedatFVDFAatFVregalessofholdingIntentionTreat menetsimilartothatoftradingsecurities6/02nowEq= 20,000No. share = 1000Priceto 20t, = 27Dinio3LiabilitesAssetExIncome;a(-LAANSC : 20,000Trading : 20,000Div : 3000reserve ; 10,0007000URG = 7,00071Cash3.00atUnN89107ta3000030,000NI10,000rarli Page No.2SJDatetobst10991Note:-galestaiDerivativethatarenotusedhedingareopens-foralways carriedatFUPL2muraltoAssetwithembeddedderivativetheassetaswholeinvaluedatFUPLI( MEEquityHFT alwaysERVE FUPL,otherequitymaybeFUPLorFVOCIclassfied2the+choiceisirrevocablevibroquetal3FVOCI(D&E)atcostifnorelipibleofFVV74B/sFVI / SRGIL+Int&divOCIUR GIL-bstongiesDFVEquity(directConnection)A70OCTwhen sold ,RGILonI/stasreclassificationadjustmentasAccountingtreatmentforForexexchratechangesi]Debt.:GAAPAll AFVOCI0008paiboiTD Equity000,051 FRST.Forexexch a GILNet of taxinOtherchangesOCI Page No. 7Date/usii] EquityReFVOCI(BothIFRS&GAAP)ftings107Eg:Equity20,000#share 1000Price to = 20ti27.17Dirl IFO 3LiabilitiesAssetExp2IncomeFillESC: 20,000AFS : 20,000NO.TDDi V 3,006Reserve: 3000+ 7000:7000Cash : 3000TH107OCITotal- - 30,000Totat - 30,000NCT : 3,000spresdNTNat27Aitiniefilidas10itastniLoan&Receivables21 10278IFRS:specificdefinationnot legalform)meet definationthenamortized CostNot meetdefinationthenFVOLI of FUPCus GRAPRelyonlegalclassifictionV9meetthedefinationHFTAFSorHTMFV Page No. 8Date//No restatement of prior period is (eqReclassificationstinps(9AAReclassification demot permitedV74 ofFor equitysecurity t theintialchoiceofFUPL1FVOCIis irrevocableReclassificationofdebt securityfromAmo it cost toFUPL (or viceversa)is permitedonly ifthebusinessmodel is changedIIFRSIt will riq judgmentzatilidoDont allowrelassificationof"designatedatfairvalueForHFTisrestrictedDebtinitialasAFS FVOCI)to HTMif changeinintentionorability.HTMAFSifholdernoAFSlongerintentsorisNTMnolongerabletoholdIGAAPbositwithinglytoo10AlowsreclassificationofallCategoriesifjustifiednoFVisdetermindatdate0/28oftransfer27A Analysis ofOperatingperformanceshouldexcludePage No. ainvestingactivitiesDate / /HIMFromTo=U.R G/LasilosialFV PL&priceAnyIncome 15( Restricted in IFRS)HTMFUPLIn/sFV Amort (o)toomAV7ANot in (FR) )218=dif on I/SHIMAFSOTC2)JAFSHTMAmortized out of OLIAFSFVPLTransfer out to OCICNot in IFRSRestricted under IFRSAllHFaFVatthe E/F dateNote:DebtEVPLHTMaret/FatFVinandtheFVbecomeCarryingthetranfer ANsaleAmPurchase priceUnRealizedGains/Cossessince inseption/Deb :FV-AmortCost=CumulativerealizedEquity:FV-PurchasepriceComlativeURG bluoraprintingPage No16gritesbate //UnrealizedGIL)periodDfor=Camulativeunrealized gainJ9SummeryFV PLFuolAmortCost19V7BlsFVFVAmout lostDFVOCIItsSTDiv/Int27Div IntGILRGILRaleGILxDebtInstrument115171B/S +stab912toV97.4 IIAAmortized lostCoupon + Dis/premAmost 65Fair VOCItoAHInt IncomeFov17UR GILFUPLInt home &Equity 60UR GILFV--fing.,3. &3Page No. ICDate//value=Coupon = 9%PV =fort96,204EgYTM = 10%AnnualCouponatEndyrFair value ofbondattheendofis98,506Determineimfact onB/SUsifbundisclassifier2/8asHTMFUPLt FV0LItSol"How toCalculateIntincomesameinall3valueamort=Coupon+DisDisbond2 MethodI96,209 X107.=9621-IntincomebasitioniACoupon = 9000(96219000)621 - Amort disc2PV = -96,209FV = 100,000PMT900011410%CPT(V)>52ndPVP1[P2Q1[L]BAL=Amortlost=96,830PRN=Principal=620.9 AmortdiscInt :9620 Page No. 12Date / /1AmortizedCostto20172)BlsAmort lostto002,88END YrlB/s96,830[ 96,209+621J(0I/s-9621I96,209107. ] or [ 9000 t 62]of wallSell for101,000at Beg Va2fromImpiniband itI/sRG+ 4170L101,000 -96830 ]aborts.Ms.selling price - Amost Carrying Value BLs153P=01XPOS,pAmortized disc - 9621 - 9000621augho.)2FV PLEND Yr.000PTM9AmortCVV7Fair value212,000Amort prem = 2,000CV at End= 24000 - 2000= 238,000bazing0297tontaxtiomIngratingbalingmiV9 Page No. 17Date//1/5B/SEquityHTMInt income = 12,000Amort cost = 238,000willFVPLReported at fair value-Int income = 12,000UR G = 32,000= 270,000(270,000 -238,000)FVOCIInt income = 13,000FV = 270,000UR G = 32,000Net of taxes ton ocisDesignatedInt in come = 12,000FV = 270,000-FV 0UR G = 32,0002Saleoftheassetfor273,000 at Y2 BegUTM :-Selling Price - CV C amortized Cost)=273001 - 23800= 35,000UFI :- Selling price - CV (FV at the end of 2010)= 273,000 - 27000 = 3000AVES :-SP - CV (Fv at ZOTO) t UR G= (273,000 - 27000) f 32,000 N/ 35,000Designated FVasFT-sameThe 40 UR Gist/pfromotctoI/Sasredassificationadjustment Page No. 18Date//LoanImpairment18211In IFRS 9(20) trumAIn carredlossmodelExpect credit lossReplacced9V7byofseRNRey not onlyCurrent4historicalCooinfoaboutloanbut alsoforwardlookinginformationtool100Results inearlierrecognitionofimpairment(1012-othexpectedlosses forperformingloans&lifetimeINafor2102=00185worfs(0105fixbrogitpaille292iGREENS000,SFS)20betongilmail Page No. 14Date/ /M9.3Invest'inAssociatesIOwners ship : 20% - 50%Single line itemMethod. EquityProportionateshare of investee'sReporting:at Costprofitisrecordedon investor'sB/S ;NonCurrent assetsis&B/sBelowEBITDivReqfrominvesteearenotrecognizedintheinvestor'sAlsTheyareReducedfrominvestA/c &trfdtoCashEquityInitialInvest=Cost% Easing% DivB/S = Reported at Cost + Earnings- DivKlost =%FMVofAsset+GoodwillI/S =Earnings%of NIprinageBls in Investment=(y.shareinCoEarning - (% share in Co. X Div )=%shareinCo.X[Earning - Div=%shareinCo.XARR21Net assetInvest" =%FVNAAcquationt%Net Asset+Goodwill Page No. 20Date//Note :IMV of ShareisirrelevantIfInvestA/c fallstozerobecauseofcon finouslossesequitymethodisdiscounted-Itisresumedafterallpreviouslosses are absorbed.Ex :Co. P invest1,000+in6.for30%ondec3120XSEarnings 8 & divforthenext two ofareAssociate6 S.20x620XstingsEarnings120 =30%X GOO180600Div30 =30% 6001845301.1150InitialSol"69t20998Cos P Bls20x62087Invst" in Co SPurchasepriceopening balance10001090 =+ Earnings120 280180-Dividendsoriginal(30)A(45) 3135 eldInvest(.Cls1090 do1225Co PIls% FMV NA ACQt%DNHAGWgivel120180Equity Income Page No. 213rd Sep 2022 SaturdayDate / /Ex Red Company purchaseda30%StakeinBluefor80,008AtAcquisitionthefollowingdata15,000BV=FV&Current Asset225,00030722500XPPE+205000E50,000+75,000Total Asset250,000300,000Liabilities(50,000)150,000 )Net Asse. f60,000. = 30%X200000075,000 =304X 250,000Blue eqisdepover10yrperiod usingthestraight linemethodBlue reportedATof100,000andpaiddivof60,000inthefirstyraftertheinvestwds made.CalculateAGood willBEarnings attributable totheIequityinvest inthe lyr in Red alcC(VofInvestinRedprintendB/SSolnAThe invest" is stillPurchase Price80,000shown in the B/S at30% BV Net Asset(60,000)80,000Attributed to FMVadjgoodsPPE 30 7. x 50,000(15,000)Goodwill of 5000Good will5,000isincluded in thePartialCVI Owerership X FMV Net Asset30% X 250,000 Page No. 2DateGoodwill =Purchasepricetownership ofNet Asset@FLBRed'sEquityits*30,000+oogoasRed proportionate share% share ofFMadjtoPPE(0.00,02)of blue's reported50,000 X30%tawN= 15,000100,000307(1,500)Dep over loyr (sk)In28,50015,000 ofloyr6.00shown aftertineinRedniPLLortCB/SInvest"oldwtNdirHoA75,000+ 5000 terviPurchasepricebas80,000sEquity Income28,5000 - 30000 - (500Removalsfrom singla and DivReceived(18,000) - 30% X 60,000Alinedidal x Yr-endInvest"90,500acashInvest"inRed'sB/S% ACQXB.V. of NA at beg yr t NI -DivUnamortizedisser0.3x[200,000t100,000-60,000]t[200001500]90,500 isPage No. 23DateRSOSInvest"CostaboveNetBookvalueofinvesteeInvest"A/Cstillone -slineitem2NExcessofInvest"costoverBVis allocatedto.investee'sidentifiableassetandliabilitiesbasedontheirFVstap+Inventory :-Exp+PPE :-Dep (capitaized)+land:-@FVsvitsidebeen2971&other assetsthatarenotCapitaizedReminderistreatedasInvestorgoodwilladjustitsISBSfor add"exp (dep)ok.Good willRenewedforimpairmentbnRegular basisAcquisitionIFV appriciationCostFV ofAmort to invest P/CNet identi-BV of Netover economiclivesfiable assetasset iden tifiable1tilongassets PageNo. 24thIDate//Sep2022SundayM9.4Equity MethodImpairmentgrodsus GAAP :FVCVanddeemed permanentsameIFRS :FVCV&Not V8 temporaryCV-FV = Impairment lessRecoverbleamtValue in UsenohigherofNet SellingpriceIFRSneedobjectiveevidenceloss eventAll3LossonIlsforbothStandardImpact of on FCFmustNI&onB/SCVReliable PreasurmentmeetNo ReversalunderIFRS & GAAPexceptgoodwithnon-goowillimpairmentlossesGoodwillnottestedsepratelyTransactionwithAssociatesV7Upstream -InvesteetoInvestorprofitoftransactionrecordedonassociatealcProrateDownstream -InvenstortoAssociateprofit on transactionrecordedoninvestorale Page No. 25Date//Both Cases investor Can influence amt & timingPro- rata shore of profit Not Confirmedthroughresaleof use is eliminatedfrom equityin com eunconfirmed profit means goods have notbeenusedorsoldbythe investor..ProfitiseliminatedtotheextentofinvestorY.share+Profit eliminated to Total unrealized profisX% of share holdingI+ Total unrealized profit =Profit margin X unsold inventoryEg UpstreamInvestor owns30% of associateInveAssocisoldgoodstoinves for& recognizedprofit of$ 15,000At yr end50% of goodremainoninvestor inventorySol"Reduction of investoi's Equity income15,000 X 50% X 30%=2,2507,500 unconfirmedEg Down stream30% of asso. Inve for sold 40,000 of goods for 50,000and recoginzedprofit of 10,000 At yr end 10% ofgoods remain in associate Inventory werePage No isDate//ReductionIofInvestorEquity Income10,000 X 10%x 30%=300Profit$1000ExP (investor)Calculateis 57,500&Equityincomeon primeI/sfor2010valueoninvestinAltononprimeBlsfor2010tobe732,500I12,000stillprofit from upstream transaction in 2010 wass+onPtheinventory at I the end of 2010 asgoodshasnotyetbeensold.2Downstream transaction of 100,000 worth of goodstoaltonfor160,000.worthDuring2010 t Aton sold goodsof140,000tooutsidepartieswhile20Kto worthgoodsFemainwassoldin2011CalculateReportedeasningsamtofreported onPIlsforequityincome2010&Value on investinAlton on P Bls after transaction"i022.0 Page No. 27Date / /Sol'1Upstream :UnrealizedProfit=12,000Pi% share12,000x259ARNdood=3000floo.2 Down streamTHANProfit164000 - 100,00060,000Alton sell8757.ofgoodspurchasedfromprime140) 160 IN12.5 remainunsold219URprofit12.57. 69000= 9 7,500toPxIshare=25%X7500=1875tza0°Equity Income(Revised)=57,500-3000-1875= 52,625(V(Revised)732,500-=3000tiups2)=70 727,6252011 20K soldrealedprofiti-e1875contributeandEquityIncomein2011 Page No. 28Date//Fair Value Option:mortique-BothIFRS&GAAPhaveoptiontoreport at FVFVNAVIFRS:-VC,Mutulfundsunittrustonly.Investus GRRP :- All entitiesCompany- Option avail at timeofrecognition&isirrevocable- UR GlsonIs2.5.-UnderFVmethodInvestorBlsdoestnot Contain%shareofassociateProfit4lossordivAU-ExcessoflostoverFVofassocitate netidentifiableassetisnotamortized.norgoodwilliscreatelAn alyst Issuestipps-EquityMethod(Is equitymethodappropriate1Influenceshoulddominatebrigh - lineownership %2B/SGWt%FMVNAAcety.WANettingassetsagainstliabilitysandunderstatemayobscureliabilitylevelage ofPage No 24Date//3 IlsParent+%NI AssaitNIonlyShareofNIis shownstatesfaredResult in overstutementParentof NPMEarningsnotbe distributedasdivlowermayearningsqualitygilidniaM9.5:Biz2Combinations:B/S- Under IFRSbizCombinationresultingfromstructeroflargerentityarenotdifferentiated-GRA PMergerAcqConsolidationAcq + targetAcq + TargetAcq + targetAcqAcq + targetNew Co.A+B =AA+B = (A+B)At B = CSperate a/cAcqer . present Consolidate alcVariable Int Entityless than 100%Share 7 req to reportminiority 8 interestControlisnotbasedtoCo-exist tougther with parent r sub relationshon eq ownership Page No. 30Date//3 AlcsParent A/CSubs A/cGroup alcflooInvest at CostBls original- Goodwillvalue- Parent assets + sub asset FMV- Parent Liabilities t Sub Liability FMV- EquityParent s/cParent RIE t OCIMinority Int28711960.0iCRIE Bls - RLEAcq)Accounting forAcquisitionmethodIBiz CombinationPooling ofInt method IIafforttopretAILPSAbecause it use historical valueASA methodNo impact non on RevAEquity would be lower Compare to proportionateIPooling of Int methodUnit - of Int Method (akGAAPIFRS- Consolidationwasdoneasifthe . companieswereasingleeconomicentity- Assetand liabilitywerereported at BV Becauseof thisdepwaslowerandprofitswerehigherNot allowed Now Page No. 31Date / /Rey by both IFRS 4 GAAPIIAcquistion MethodTEgB/SParent alisD'Debt84gol.IRecord any financial asset raised Cash spent 7 andinvest at costinparentaccounts(ifgivenpreacquisition accounts )L-CashInclude RLE after AcqInvest2Element invest"alc(purchase price) of parent andprequisition equity a/c of subs3 Createminority Int2 Method4CalculategoodwillsTransactionbet" partyareignoredKtheasytom baine100 Y. ofassetsandbothliability offirmsCnetofintercompanytransaction)It Can measure reliabilyContigent liabilitypast obligationthat arisefrom past eventExpense as incurred Eg legal feeslad connification asset - - Outcome of Contigent liabilityan uncertainty related to specific asset orliability ofacq- against lossesaboveaspecifical amton /a liability arising from a particularContigency Page No. 32Date//Bargain Acq - Purchase price < FV= PP - FVGain lloss - - on IsEx Supposethat onJan 1st 2016 t Compancy A acquire 80%of theCommon stock of company B8000 in Cashtothe shareholder of Co.B . Pre acquisition B/Sto Consolidate the inustLash =0investBlsCo.A6.BAdjConsolidatedInvest" in B80008K-819@SCA48,000 4000016,000(80,00)@ 56,000other asset32,000800040,000Totatal80,00024,00096,000Minority Int (Equity)0O2,00012000CL40,00014,00040,000 54,000Common stock}28,0006000(6000)equity28,000RIE12,0004000(4,000)12,000Totat LtE80,00024,00096000Because if pe WC9Purchase price8,0008008Sub NAOil - Goodwill (partial)Asset - 24,00080%FMV NA - 10,000(+)Liability 14,00020%X .20% Minulity10,000= 2000 S inteles Page No. 33Date / /CompairingAcqmethodwithEquitymethodB/SAcq methodEquity MethodCA56,00040,000Invest in B0 - Not neting8,000-GW H. FMV NA Acq)other Asset40,000 .32,000Total96,000 Higherfrom80,000 LowerVANCL54,000 -Parent tsub40,000 - Parent 6Common stock28,000(No minutity)28,000Minority Int JEap200042,000list40,000RIE12,000(Ey= Ary =)12,000Total9600080000janid maEquityEquity basedRatiolowerinAcqbecauseequityMinorightIAcq method- - Com bainedAsset&Liability2Eq Method - 80% ofCo.BinOne - lineInvestacc00002 Page No. 34Date / /M9.6 : Biz Combination- Ils3 A/CParentSubGrouped- DivRev - ExParent t sub EarningNo FMV AmortCRev - Ex)Amortization of FUV AdjMinority IntcootsV/sEliminate Subs earnings from parent (div-)Substract minority Int Share of earningCombine Rev & Exp of Both firms (net ofintercom pany transaction)Only include post- acqresultsEx Continuing previousexpyilsCorpon ACo.BRev60,00020000Ex9000016000NI20,00004000Using the yr-end Ils to Consolidatethedinings of subIyr after acquisition Page No. 35DatesolV/SCo.ACOBAdjConsolidatedPRev60,00020,00080,000Ex(40,000)(16,000)(56,000)Minority Int0(800)-0(800)INetIncome20,0004,000goingstools23,200 Hiwboon .itg+9.1GOOOX 20% 800unitCompairingwithEqMethod tanin1/5Eq MethodAcqHiwbooN11177SRevJ9220Parent60,000V7180,000 7 Parent + SubsAfter Exp(40,000)(56,000) (100 >. of both)tax Eq Income4000x80%3200oftionim).(800)-Remotueline Minority Int400023,200=Net Inlome23,200xSame207= 800Hot Page No 36Date / /5th Sep I 2022 MondayM 9.7 : Biz Combination :- GoodwillPartial VsFull GoodwillIPartial Goodwill - High DIEotitunimGoodwillPurchase price % owned of FMV of tgllnet identifieble assetsNoncontrolling (minority Int) is % not owned timesfair value of net identifiable assets.2 Full Goodwill Low D/EGoodwill = FV - FV of net identifiableassets.Noncontrolling (minority Int) is % not ownedtimesp3total fair value of subsidiaryGAAP = Full Goodwill onlyIRRS = Partial or full.Full = Partialwhenacq 1007. Page No 37Date//100 /QueGoodWoodCorppaid600 Mforalltheshareof pine Corp - Attheacqdate ,pinereported the followingB/s amt.CA80Net PP&E760440Goodwill30Not identifiableassetLiabilities400frilloitnoStock equity470FV of PP4Ewas120aboveB.VThe fair valueof all otheridenticatidentifiableasset=BVCompute GWPurchase price600BV NA440EMV adj120FMV Net identifiable asset560)GW40 1Que Supposewood paid450for75%of PineGWunderfull4partial?FV of subsis450 = 600m - 100775%FVofidentifiableassetslessidentifiableliabilities = 560(600-560)=40Full GW = 40m30/151.PartialPartialPrice450is75%XGOM= 30m%FMV NA(420)-(757.x56)GW30 Page No. 39Date / /Comparison ofMethodsB/SFull GWPartial GWFV - 100% FMVPP-%FMVNAGWNA600 -560450 - Co.75 X 560)= GOt 10= 30175%FVFMV NANon Controlling25% x 600 m25%560Int= 150+10= 140,Totalassetsandtotalliability+Eqare10mmorewithfullgoodwillNodifffor1007mownedsubImpaisment of GWGWisnotamorttasetelforimpairmentannuallyGWCannotbesepiatedfromoverallbizGW t NAGWisimpairedwhenCV>FVImpair"isreported aslineitemonIlsC infrequent itemGoodwillimpaimentCannotbereversedfor V7esitilidailaldwifitashidoV7 Page No. 34Date//IFRSVsGAAPImpairmentI IFRS . -synergies. GW allowcatedacrossCash GeneratingunitsthatwillbenifitsCGUfromacyOne-Step - process :RecoverableamtofCashgeneratingunit 950,000FMV950,000FMV RNA775,000Therehasbeenanimpairmentimplied GW17,5000IFRR Impairment loss30,000 Egl I FintreeGRAPACQ80T. for SOKTarget's BlsLiabilitiesAssetsLibilitiesAssetsESC: 20,000Builing 50,000ESC: 20,000Building : 20,000Reserve: 70,000 Furniture: 50,000Reserve : 20,000Furniture: 20,000Inventory: ; 20,000AP : 40,000AR : 10,000Coan: 110,000-Cash : 80 80,000Loan: 20,000Cash: 50,00Total 200,000Total 200,000Total100,000Total 100,000FVoftargetassets : Building -39,000 Furniture - 10,000AR=0Full GWPartial GWus GAAPIFRS:IA70%500FV identifiable asset200 x For.100%714to% we should py(140)Amt paidSOCGW = 714-200 -GW: = 360= 0514 Page No 42Date / /ACQ BISFVEquity100GW100200FU of net identifiable assets :Debt500PPE200500= 500 +100 + 100 - 500Inventory 200100CashPPE Invent Cash Debt100600600= 200Acger creaqued 707.o500Goodwillf Total value of target -Net BV f tucpConsolidate BLS (full goodwill)62,500 -30,000 = 32500LiabilitiesAssetsTotal value of targetESC : 20,000Goodwill : 32,500Reserve : 70,000Building: 80,00080%50,000MI 12,500Furniture: 60,000100%62,500Inventory: 20,000AP : 20,000AR :-Loan : 150,000Op Cash : 80,000Net BV of far getCash paid: (50,000)T's Cash ; 50,000Building - 30,000Total272,500Total : 272,500Furniture - 10,000Cash - 50,000Laon - (40,000)Ap- (20,000)30,000 Page No.43Date / /Minority Int (MI): That portion of subsidiarywhichatisnotowned by the parentMI = 62,5000 X 207= 12,500Ex2 IFRSACQ B/S60% for 25KTarget B/SLiabilityAssetsLiabilitiesAssetsESC : 10,000Building: 40,000ESC: 5,000GW: 10,000Building: 10,000AP: 40,000Loan: 50,000Cash:60,000Loan : 20,000Cush:5000Total- 100,000100,000Total - 25,00025,000FV of target assetBuilding F20,000Consolidated BIS (partial GW)LiabilitiesA ssetsTotal value of targetESC: 10,000GW: 22,000MI : 2,000Building: : 60,000Building - 20,000Op.Cash : 60,000Cash - 5000AP 40,000Cash paid: (25,000)Loan - (20,000)Luan 70,000I' s cash : 50005,000total 122,000Total 122,000 Date//PeroportionatevaluationGoodwill100%5000Cash paid a proportionate valn60%= 25000 - 3000 -3000= 22,000MI =5000 x407.- 2000Ex Goodwill ImpairmentCV of CGU / RU (including GW) = 1,400 GW= 300FV of identifiable assets = 1200 Recuvereble amt of CG u /Ru= 13000IFRSGAAPImpairmentreqImpairment loss 11 1400 -1300FVof Ru (1300) < CV of Ru (KOU)= 100New GW = 300-100Implied GW II 1300 -1200 = 100= 200Impairment loss = 300-100 - = 200EgProportionate ConsolidationAca Bls507 for 50KLiabilitiesAssetTarget BlsLiabilitiesAssetsESC: 10,0000ESC: 60,000Loan : 100,000Cash:200,000Luan: 90,000Building: 50,000Cash : 50 ,000Total 200,000200,000Total 100,000100,000FV of target asset : Building = 60,000 Page No. 45Date/Consolidated B/S (proportionate consolidation)LiabilitiesAssetsLoan 100,000 +(50%.X40,000) = 120,000ESC: 100,000GW 15,000Building: 50% x60,000 C = 30,000:Building: 30,000Cash: 200,000 = 50000 + = 175,00GC50% X 50,000)Coar: 120,000Cash: 175,000Goodwill: Net BV=70,000220,000220,000(502)Proportionate Val" =35,000sGoodwill (Cash - = 150,000Contigent Assets & LiabilitiesCor tractualNon ContractualContigent Asset2More likelyotherwiseContingent LiabilitiesIthan notNotincorporatedRecordintoB/SimmediatlyaFV Page No. 466th Sep'2022ThuesdayDate / /M9.8 : Joint Venture Contractual agreementJVsareControledby2 or moreinvestorsEgIFRSIJoint Venture :-SepratevehichelCSeperate legal entities)Each partyhaverights to NA CEquity Inut"-Evquityaccounting2JoinOperation:Not a separate vehichleEach - partyhaveright to Individual A&LProportionateconsolidationGRAP - ProportionateConsolidationallowed in rate sistuationEEx ProportionateConsolilationSoutwortC.PCo.SRCA48,00016,000Pacy S for 8000Other asset320008000for 807.pritoryTotal80,00024,000ALCL4000014,000Common stock280006000RLE12,0004000Total80,00024,000 Page No. 47Date/ /BlsCo.PCo.SAdjPropConsol40KCA48,00016,0008000 X [80% X16000)52,800Invest" in S0"80008000 1-80000other asset32,0008,0008000 x80738,400Total asset80,00024,00091,2400CL40,00014,00014000 x 80751,200Common stock28,0006000(6000)28,000RIE120004000(4000)12000Total8000024,00091,24001/5Rev60,00020,00020000X 80%76,000Exp(40,000)(16,000)16,000 X 80%(52,800)Income from subs IV800bato(800)0392NI20,8004000123,200CompairingProportionate Consolidation Vs Equity AccountingNPMB/SEquityProp. ConsolCA40000Parmonly52,8000Invest in S80000Other asset32,000 -P38,4000 - P + 7-JVTotal asset80,000191,200 Page No. 48Date//P+%JVCL40,0002. 51,200Common Stock2800028,000 P } sameRIE,12,00012,000 PTotalEa80,00091,200GRIE Bls - R(E acq)I/SRev60,000 P76,00 2 P+Y-VVExp(40,000) P(52,800)Equity Income32000NI23,200,23,200SameCorp, partnership ) toof turstM 9.9SpecialPurposeEntities/VariableIntx* ** *IFRSEntelyCoSPE isEalegalStructurecreatedtoisolatecertainassetsandRobligationoftheCreatedsponsortoservespecificpurpose :purchaseassets ,fundR&Dleaseassets ,enhancetheBlsTypicalMotiveistoobtainlow-lostnewIFRS&GRAPSPEdidnotthavetobefinancingPriortobeConsolidatedfor usingbysponsor; instead accountedequitymethodSPEdoes notneedtohavesepalate monet Page No. 497th Sep 2022 WednesdayDate//SPE arecreatedto acco modate specific needs ofSponsoringentity . Sponsor usualy dont hold voting rights isroSPE Hanfer Risks & Rewald from equity ownert to vot VIEGAAP -(Equity investor (er fix fateownerSPE isSVIES that meet curtain conditions:-Total eq at riskisinsufficienttofinanceactivitiseswithoutadditionalfinancialsupportorEquityinvestor.lack anyoneofthefollowing:Abilitytomake decisionsAg Any one conditionobligationtoabsorblossesmust meetRight to recq reternIfSPEisaVIEitmustbe con solidated - GAAPUnder IFRS , SPE are consolidated if sponsor controls the992SPETypical SPE UsesSale and leaseback structure5?SyntheticTxleaseResidualas operating leaseLeasesGuaranteeloans or mortgages sold to SPE } Securitized e Ex deltSubordinatedwhichissuesmortgagesbackedLounssecuritiesCompany sell ARtotheSPEwhich2SaleusestheARascollateraltoborrowJSPE established to fund R&D avoidsrecognition of R4D exp of liabilities}R&Dcost Page No. SoDate/Sponsoring CompanyAssetsCash $IssuesSpecialpurpose EntityiAsset-BackedDebtEqDPrior to new standards. usMajority Equity ownershipGARP used bright lineNot sponsoringCompanycriteria allowingavoidanceof ConsolidationfaoConsolidationofSPEIFRSConsolidatewhenSponsor has control t indicatedbythe following:Economic substance-SPEisforbenefit of sponsor- Sponsor hasE/ Sponsor abledecision-making powerAny Oneto absorbrewardsandrisksR-SponsorhasresidualInt.GAAP + an SPEisConsolidatedaVIE(andmustbeAConsolidated)ifanyofthefollowingconditions are met- Insufficientat-riskinvest (typicallyless than- Shareholderlack decision - making rights EQ10% L Equity CepitAsset104.- ShareholderdonotabsorbexpectedlossesEqRis- Shareholderusonotreceiveexpectedresidual returnsortEquity method Could be usedRewalOSPE-nolongerpermitted( Post2009) - No Risk & RewardocalifingSPEoutforFinancialassets aloveIf spinsol has resurseCollateralizeborrowingPage No. 51Date//*Effects of ConsolidationConsider aSecurizedSPEBorrows moneytopurchasereceivablesfromsponsorsConsolidationreq:- ReceivablesaddedbacktoSponsorBISof- Debtaddedto1Sponsorliabilities- Leverage ratioreceivablesAR Turnover+ROA- Net impact-nolongeroffB/SExampleCompany Pwantstoborrow1002 optionABorrow 100fromBankBB] Sell 100 ofARto an SPEcreated for thispurpose + TheSPEwillfundtheforpurchasebaxby borrowingfromBankB1ptoB/s2.8392Asset$Liabilities$Cash50CL001500AR200Debt1200 intoFixed assets2000Equity550Total asset2,2502250 Page No. 52Date//Option A sol"-Co.P Bls afterbrowingEoAsset$Liabilities$DCash100t150CL500Acc RecDebt1300 I tiod200Fixed assetEquity5502000Total Asset2,350Total LtE2,350 Spotava109Cash&debtTby100mOptionBsolnCop BLS after burrowingAsset$Liabilities$Cash150a5000EAR100Debt1,200Fixed asset2000REquitySSOTotal Assets2,250Total LtE2,25SPE B/S afterpurchaseAsset$liabilities$AR100DebtloaTotal100Total100 Page No 53Date / /Co. P B/S after Consolidating the the SPEAsset$Liabilities$Cashso +100150CL500.AR200Debtloc + 1300Fixed assets2000Equity550Total Assets2,350Total LtE4350No difffromoption ARecognitionanMeasurementbotiogramiIdentifiableassetsandliabilities-11- recorded @ FVAcqmustrecognizeA &Lthat theacquireehadnot recognized (i.e. internallygeneratydevintangibles)internally GWContigent Liabilites : Obligations from past eventIFRS - RecognizefairvalueatacqifCanbemeasuredreliablyContigentasset are never recogni 20GRAP - RecognizeFVvalueatacqifprobableandCanbereliablyest.Contractual -dFVNon- -11- - Record if more likely than not Page No. 54Date//IndemnificationAssets-Acqmustrecognizeanidennificationasset if sellerContractuallyindemnifiesaContingencyuncortuinty offuturelossesFinancialAssetandLiabilitiesAcq reclassifies atdate of acqbased onContractualterms ( economicconditions4acq accot PolicyIn- Process R&DCapitalizeatacqthenamortizeBIScompletedasasoranimpairedCIFRS 4 GARP)I/sintangibleRestructuring CostsnotpartofacqCostExpwhenincurred(LAC4GAP7EIFRS vs GAAPRContigent ConsiderationEx Sub Hit target Nsubunderperligence(FRS & GARPEx.pp&(ClassbackppLiabilityAssetRecognizeestFVatacqasassets ,liabilityofinChanges inFVorliabilitiestoequityI/sChangesinFVShaofequitysettledsharesharein equityforfordealSharesGAAP onlyChangesinFVofassettoincomestatement. Page No. SSDate / /*Comparison of MethodsrAll 3 Methodesreport Same NI2Equity- Equith method} sameProportionate ConsolidationAcq method - higher by Ncl or MIHemEquityPro. ConsolidationAcq methodSale-PMiddleP+%JVPtsExp- PMiddle1P + Y.JVPtsNISamesamesameA&L- PMiddle = P+7.JVPts- P&SH Equitysame before acqSame as equityonly because of MI- lower- HigherNPMNiisaleHigherIn bet"lowerROE M/EqHigher1same as EquitylowerROA NlasetIn bet"lowerHigher.Equity Method - Best Ratio for Co.sLeverage will depend on which affected more proportionately