11.
12.
13.
14.
15.
A
B
D
A
B
16.
17.
18.
19.
20.
C
D
C
D
A
21.
22.
23.
24.
25.
B
C
A
B
C
26.
27.
28.
D
C
B
Solution:
1. A
Solution:
Share capital
Share premium
Totals
COLLOQUY Co.
2,400,000
1,200,000
3,600,000
Combined entity
2,800,000
4,800,000
7,600,000
Increase
400,000
3,600,000
4,000,000
15
400,000
40
10,000
4,000,000
10,000
400
Solution:
Consideration transferred
Non-controlling interest in the acquiree
Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired (6.4M - 3.6M)
Goodwill
4,000,000
4,000,000
(2,800,000)
1,200,000
COLLOQUY Co.
2,400,000
1,200,000
3,600,000
Combined entity
2,800,000
4,800,000
7,600,000
Increase
400,000
3,600,000
4,000,000
4,000,000
400
10,000
400,000
10,000
40
4,000,000
4,000,000
(3,700,000)
300,000
9. C
Solution:
Consideration transferred
Non-controlling interest in the acquiree (1M x 25%)
Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired
Goodwill
3,200,000
1,000,000
720,000
4,920,000
(4,400,000)
920,000
16
10. C
Solution:
Consideration transferred
Non-controlling interest in the acquiree (1M x 25%)
Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired
Goodwill
3,200,000
1,000,000
720,000
4,920,000
(4,400,000)
920,000
11. A
Solution:
Consideration transferred
Non-controlling interest in the acquiree (1M x 10%)
Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired
Goodwill
3,200,000
400,000
720,000
4,320,000
(4,000,000)
320,000
12. B
Solution:
Consideration transferred
Non-controlling interest in the acquiree (4M x 100%)
Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired
Goodwill
4,000,000
4,000,000
(4,000,000)
-
13. D
Solution:
Consideration transferred (4M x 60%*)
Non-controlling interest in the acquiree (4M x 40%*)
Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired
Goodwill
2,400,000
1,600,000
4,000,000
(4,000,000)
-
17
16. C
17. D
18. C
Solution:
The consideration transferred on the business combination is
computed as follows:
Cash payment on business combination
4,000,000
Additional payment to subsidiarys former owner
200,000
Consideration transferred on the business combination
4,200,000
The fair value of net identifiable assets acquired is computed as
follows:
Fair value of identifiable assets
6,400,000
Fair value of inventory not transferred to DIAPHANOUS
(360,000)
Adjusted fair value of identifiable assets acquired
6,040,000
Fair value of liabilities assumed
(3,600,000)
Adjusted fair value of net identifiable assets acquired
2,440,000
Goodwill (gain on bargain purchase) is computed as follows:
Consideration transferred
4,200,000
Non-controlling interest in the acquiree
Previously held equity interest in the acquiree
Total
4,200,000
Fair value of net identifiable assets acquired
(2,440,000)
Goodwill
1,760,000
19. D
Solution:
The settlement loss to is computed as follows:
Settlement loss before adjustment (off-market value)
Carrying amount of deferred liability
Adjusted settlement loss
320,000
(240,000)
80,000
18
6,400,000
160,000
(200,000)
6,360,000
(3,600,000)
2,760,000
Settlement gain
400,000
(520,000)
120,000
(fair value)
Consideration transferred on the business combination
3,600,000
4,040,000
20,000
20,000
24. B
Solution:
Dec. Liability for contingent consideration
31,
20x1
(20,000)
20
40,000
40,000
25. C
Solution:
The consideration transferred on the business combination is
computed as follows:
4,000,000
Fair value of shares issued (10,000 sh. x 400 per sh.)
360,000
Fair value of contingent consideration
Consideration transferred on the business combination
4,360,000
360,000
20x1
360,000
28. B
Solution:
The adjusted fair value of net identifiable assets acquired is computed
as follows:
Fair value of identifiable assets acquired
3,600,000
Fair value of liabilities assumed
400,000
Fair value of contingent liability assumed
Fair value of net identifiable assets acquired
6,400,000
(4,000,000)
600,000
21
Exercises
1. Solutions:
Requirement (a): Number of shares issued
CONJUNCTION Co. Combined entity
1,200,000
1,400,000
Share capital
600,000
2,400,000
Share premium
1,800,000
3,800,000
Totals
Increase
200,000
1,800,000
2,000,000
2,000,000
2,000,000
(1,400,000)
600,000
2. Solutions:
Scenario #1: Goodwill (gain on bargain purchase) is computed as
follows:
1,600,000
(1) Consideration transferred
500,000
(2) Non-controlling interest in the acquiree (2M x 25%)
360,000
(3) Previously held equity interest in the acquiree
2,460,000
Total
(2,200,000)
Fair value of net identifiable assets acquired
460,000
Goodwill
*100% minus 75%
22
1,600,000
200,000
360,000
2,160,000
(2,000,000)
160,000
4. Solution:
(1) Consideration transferred
(2) Non-controlling interest in the acquiree (2M x 100%)
(3) Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired
Goodwill
2,000,000
2,000,000
(2,000,000)
-
5. Solution:
(1) Consideration transferred (2M x 60%)
(2) Non-controlling interest in the acquiree (2M x 40%)
(3) Previously held equity interest in the acquiree
Total
Fair value of net identifiable assets acquired
Goodwill
1,200,000
800,000
2,000,000
(2,000,000)
-
6. Solutions:
Case #1:
The unadjusted goodwill is computed as follows:
(1) Consideration transferred
(2) Non-controlling interest in the acquiree
(3) Previously held equity interest in the acquiree
23
2,000,000
-
Total
Fair value of net identifiable assets acquired
Goodwill (recognized on Sept. 30, 20x1)
2,000,000
(1,400,000)
600,000
2,000,000
2,000,000
(1,000,000)
1,000,000
600,000
1,000,000
400,000
400,000
to record adjustment to
provisional amount assigned to building
Retained earnings
Accumulated depreciation
15,000
15,000
24
Case #2:
INNOCUOUS shall recognize the fair value of the patent as a
retrospective adjustment to the goodwill recognized on September
30, 20x1. Further, the amortization expense that would have been
recognized had the patent been recorded on September 30, 20x1
shall also be recognized as retrospective adjustment.
The adjusted fair value of net identifiable assets acquired is computed
as follows:
Fair value of identifiable assets acquired
3,200,000
Fair value of unrecorded patent
200,000
Adjusted fair value of identifiable assets acquired
3,400,000
Fair value of liabilities assumed
( 1,800,000)
Adjusted fair value of net identifiable assets acquired 1,600,000
The adjusted goodwill is computed as follows:
(1)
(2)
(3)
Consideration transferred
Non-controlling interest in the
acquiree
Previously held equity interest in the
acquiree
Total
Fair value of net identifiable assets
acquired
Goodwill
Unadjusted
2,000,000
Adjusted
2,000,000
2,000,000
2,000,000
(1,400,000)
(1,600,000)
600,000
400,000
200,000
12,500
Case #3:
Because the new information is obtained after the measurement
period (i.e., beyond one year from September 30, 20x1),
INNOCUOUS should account for the new information in accordance
with PAS 8 as correction of error. PAS 8 requires the correction of
an error to be accounted for retrospectively and for the financial
statements to be presented as if the error had never occurred by
correcting the prior periods information.
Adjustments shall be made similar to those in Case #2; however, the
disclosures provided in the notes will vary because of the application
of PAS 8 instead of PFRS 3.
25
Consideration transferred
Non-controlling interest in the
acquiree
Previously held equity interest in
the acquiree
Total
Fair value of net identifiable assets
acquired
Goodwill
Unadjusted
2,000,000
Adjusted
2,000,000
2,000,000
2,000,000
(1,400,000)
(1,600,000)
600,000
400,000
26
combination
3,100,000
( 160,000)
1,840,000
( 100,000)
3,180,000
( 1,800,000)
1,380,000
27
Goodwill
460,000
10. Solution:
Because the settlement of the pre-existing relationship is treated as a
separate transaction, the amount attributed to the settlement loss
(i.e., P180,000) shall be accounted for as payment for the
settlement of the pre-existing relationship. Therefore, the adjusted
consideration transferred on the business combination is
P1,820,000 (P2M P180,000).
The at-market value of P140,000 shall be subsumed in goodwill
because there is no reacquired right.
Goodwill (gain on bargain purchase) is computed as follows:
(1) Consideration transferred
1,820,000
(2) Non-controlling interest in the acquiree
(3) Previously held equity interest in the acquiree
Total
1,820,000
Fair value of net identifiable assets acquired
(1,400,000)
Goodwill
420,000
11. Solution:
The consideration transferred on the business combination is
computed as follows:
Cash payment
2,000,000
Payment for the settlement of pre-existing
relationship (fair value)
( 200,000)
Consideration transferred on the business combination
1,800,000
The settlement gain or loss is computed as follows:
Payment for the settlement of pre-existing
relationship (fair value)
200,000
Carrying amount of estimated liability on pending lawsuit ( 260,000)
Settlement gain
60,000
There is gain because the liability is settled for a lower amount.
Goodwill (gain on bargain purchase) is computed as follows:
(1) Consideration transferred
1,800,000
(2) Non-controlling interest in the acquiree
(3) Previously held equity interest in the acquiree
Total
1,800,000
Fair value of net identifiable assets acquired
(1,400,000)
28
Goodwill
400,000
12. Solution:
The consideration transferred on the business combination is
computed as follows:
Cash payment
2,000,000
Fair value of contingent consideration
20,000
Consideration transferred on the business
2,020,000
combination
Goodwill (gain on bargain purchase) is computed as follows:
(1) Consideration transferred
2,020,000
(2) Non-controlling interest in the acquiree
(3) Previously held equity interest in the acquiree
Total
2,020,000
Fair value of net identifiable assets acquired
(1,400,000)
Goodwill
620,000
13. Solution:
The consideration transferred on the business combination is
computed as follows:
Fair value of shares issued
2,000,000
Fair value of contingent consideration
180,000
Consideration transferred on the business
2,180,000
combination
Goodwill (gain on bargain purchase) is computed as follows:
(1) Consideration transferred
2,180,000
(2) Non-controlling interest in the acquiree
(3) Previously held equity interest in the acquiree
Total
2,180,000
Fair value of net identifiable assets acquired
(1,400,000)
Goodwill
780,000
14. Solution:
The adjusted fair value of net identifiable assets acquired is computed
as follows:
Fair value of identifiable assets acquired
3,200,000
Fair value of liabilities assumed
Fair value of contractual contingent liability assumed
Fair value of contractual contingent liability assumed
29
1,800,000
20,000
60,000
100,000
1,980,000
1,220,000
3,200,000
1,800,000
assumed
Fair value of net identifiable assets
acquired
200,000
(2,000,000)
1,200,000
30