Priority 1 = Fair value of NCI given to the problem but it should not be lower than the NCI - measured at
Non-controlling interest's proportionate share of Subsidairy's identifiable net assets @ Fair Value.
(hi guys, ito yung sa problem 3 na case: yung kay Acquired Company at Acquiree Company na nadiscuss natin noon.)
If fair value of NCI given to the problem is lower than NCI measured at proportionate share
of Subsidiary's identifiable net assets use the latter.
Note: But again the computed Fair value of Noncontrolling interest should not be lower than
than the fair value of NCI in proportionate share in Subsidiary's identifiable net assets.
Note: We apply whichever is higher rule: Part of the new provision, NCI should not have
an amount that is lower than the fair value of NCI measured in proportionate share in
Subsidiary's identifiable net assets. We use whichever is higher.
2.) Result of acquisition
Chapter 16
4.) NCI in net income of Subsidiary/ Consolidated net income attributable to NCI
Consolidated retained earnings formula if involves more the one previous year passed
First Year
Noncontrolling interest - January 1, current year - computed using formula chapter 15 xxx
Add: NCI in net income of Subsidiary/Consolidated net income attributable to NCI xxx
Total xxx
Less: Dividends declared x Noncontrolling interest xxx
Noncontrolling interest - December 31 current year xxx
Note: You must noted the initial Noncontrolling interest amount on the date of acquisition. Because that is always your
beginning
balances.
Parent xxx
Sabsidiary xxx
Total xxx
Less: Intercompany sales (Downstream sales + Upstream sales) xxx
Consolidated Sales xxx
First
Year
Parent xxx
Subsidiary xxx
Total xxx
Intercompany sales (Downstream sales + Upstream sales) (xxx)
Amortization of excess (inventory), if any xxx
Unrealized gross profit in ending inventory xxx
Cosolidated cost of goods sold xxx
Second Year
Parent xxx
Subsidiary xxx
Total xxx
Intercompany sales (Downstream sales + Upstream sales) (xxx)
Amortization of excess (inventory), if any xxx
Realized gross profit in beginning inventory (xxx)
Unrealized gross profit in ending inventory xxx
Cosolidated cost of goods sold xxx
Parent xxx
Subsidiary xxx
Add: Excess of inventory FMV over BV during acquisition that are remained unsold, if any xxx xxx
Total xxx
Less: Unrealized gross profit in ending inventory (Downstream + Upstream) xxx
Consolidated inventory xxx
First
Year
Parent net income from own operation, exclusive of dividends income received from Subsidiary xxx
Impairment loss, if any (xxx)
Unrealized profit in ending inventory (Downstream sale) (xxx)
Parent adjusted net income xxx
Add: Subsidiary adjusted net income
Subsidiary reported net income xxx
+/- Amortization (xxx)
Impairment loss, if any (xxx)
Unrealized profit in ending inventory (Upstream sale) (xxx) xxx
Consolidated net income xxx
Second Year
Parent net income from own operation, exclusive of dividends income received from Subsidiary xxx
Impairment loss, if any (xxx)
Realized profit in begining inventory xxx
Unrealized profit in ending inventory (xxx)
Parent adjusted net income xxx
Add: Subsidiary adjusted net income
Subsidiary reported net income xxx
+/- Amortization (xxx)
Impairment loss, if any (xxx)
Realized profit in begining
inventory xxx
Unrealized profit in ending
inventory (xxx) xxx
Consolidated net income xxx
5.) Income from subsidiary
First
Year
Subsidiary reported net income xxx
+/- Amortization (xxx)
Impairment loss, if any (xxx)
Unrealized profit in ending inventory (Upstream sale) (xxx)
Subsidiary adjusted net income xxx
Multiply by: Controlling interest x%
Income from subsidiary xxx
Second Year
Subsidiary reported net income xxx
+/- Amortization xxx
Impairment loss, if any (xxx)
Realized profit in begining inventory xxx
Unrealized profit in ending inventory (xxx)
Subsidiary adjusted net income xxx
Multiply by: Controlling interest x%
Income from subsidiary xxx
First
Year
Parent net income from own operation, exclusive of dividends income received from Subsidiary xxx
Impairment loss, if any (xxx)
Unrealized profit in ending inventory (Downstream sale) (xxx)
Parent adjusted net income xxx
Add: Income from subsidiary xxx
Consolidated net income attributable to parent xxx
Second Year
Parent net income from own operation, exclusive of dividends income received from Subsidiary xxx
Impairment loss, if any (xxx)
Realized profit in begining inventory xxx
Unrealized profit in ending inventory (xxx)
Parent adjusted net income xxx
Add: Income from subsidiary xxx
Consolidated net income attributable to parent xxx
7.) NCI in net income of Subsidiary/ Consolidated net income attributable to NCI
First
Year
Subsidiary reported net income xxx
+/- Amortization (xxx)
Impairment loss, if any (xxx)
Unrealized profit in ending inventory (Upstream sale) (xxx)
Subsidiary adjusted net income xxx
Multiply by: Noncontrolling interest x%
NCI in net income of Subsidiary/Consolidated net income attributable to NCI xxx
Second Year
Subsidiary reported net income xxx
+/- Amortization xxx
Impairment loss, if any (xxx)
Realized profit in begining inventory xxx
Unrealized profit in ending inventory (xxx)
Subsidiary adjusted net income xxx
Multiply by: Noncontrolling interest x%
NCI in net income of Subsidiary xxx
Consolidated retained earnings formula if involves more the one previous year passed
First
Year
Noncontrolling interest - January 1, current year - computed using formula chapter 15 xxx
Add: NCI in net income of Subsidiary/Consolidated net income attributable to NCI xxx
Total xxx
Less: Dividends declared x Noncontrolling interest xxx
Noncontrolling interest - December 31 current year xxx
Note: You must noted the initial Noncontrolling interest amount on the date of acquisition. Because it is always your
beginning balance.
Note: Why we adjust Retained earnings and Noncontrolling interest beginning with the unrealized profit in ending inventory
recent previous year?
Because we corrected net income of the current year with the unrealized profit in ending inventory recent previous
year, which is now realized profit in beginning inventory for the current year.
See the computation of adjusted net incomes for Parent and Subsidairy, we included realized profit in
beginning inventory to get adjusted net income. Make this a constant procedure. Because, I agree there
is other way. How? Don’t include realized profit in beginning in the computation of adjusted net income
and unrealized profit in ending recent previous year in adjusted retained earnings beginning to offset errors or
to counter balance. But again may I suggest to use the formula above constantly because it is seldom in
problem to have only Consolidated Retained Earnings as requirement normally consolidated net income is
also part of the requirement, with that you must included realized profit in beginning inventory.
CONSOLIDATED STATEMENT
BUSINESS COMBINATION
FORMULAS
Chapter 18
7.) Plant and equipment on consolidated - Old cost or Cost prior to intercompany sales
9.) Total gain on sale of plant assets when asset sold intercompany is sold to outsider.