Exam 3: Consolidation: Wholly Owned Subsidiaries

When there is a gain on bargain purchase at the acquisition date, the net fair value of the identifiable assets and liabilities of the subsidiary is less than the consideration transferred.

The starting point for the preparation of the consolidated financial statements is:

Which of the following statements regarding consolidated financial statements at the date of acquistion is FALSE?

IAS 27, Separate Financial Statements, requires an entity that has a subsidiary and that reports on separate financial statements for a special purpose (for tax purposes), in addition to its consolidated statements, show the investment in that subsidiary at __________.

Since taxes are paid by the individual companies, the CCA claim is based on the amount recorded in the records of the acquiree.

A parent company can report an investment in its subsidiary on its Separate financial statements under either the cost or equity method.

When there is a gain on bargain purchase at the acquisition date, the net fair value of the identifiable assets and liabilities of the subsidiary is greater than the consideration transferred. Which of the following statements in this situation is FALSE?

Fair value adjustments (FVAs)are used to recognize the identifiable assets and liabilities of the subsidiary at fair values and goodwill measured as a residual amount.

The consolidation process will involve replacing the investment account that is recorded in the books of the acquirer with the goodwill acquired from the acquiree.

Yo Ltd. purchased a commercial food preparation system for $150,000 at the beginning of 2012. The estimated economic life of the system is 10 years and Yo uses straight-line amortization. At the beginning of 2014, Tilbury Ltd. acquired Yo in a business combination. At the time of acquisition, Yo's food preparation system had a fair value of $140,000. At the end of 2014, how much amortization expense should Yo report?

In a business combination that occurred 2 years ago, there was a fair value adjustment due to land as the fair value was greater than its recorded book value by $20,000. The company's tax rate is 40%. What is the required adjustment upon consolidation this year?

Fair value increments on depreciable assets ________.

What values should be used for the assets, liabilities, and shareholders' equity to start the consolidation process?

Before undertaking the consolidation process, describe the adjustments that may be necessary in relation to the content of the financial statements of the subsidiary.

Which of the following statements regarding pre-acquisition adjustments is FALSE?

Sympo Ltd. acquired 100% of the commons shares of Grotto Co. This business combination resulted in $100,000 of goodwill. Sympo allocated the goodwill to three cash-generating units. At its year-end, Sympo conducts a goodwill impairment test. Which of the following statements about the impairment test is TRUE?