ACTBC Illustrative Problems - Full Goodwill Approach and Partial Goodwill Approach

Accounting for
Business
Combination:
Illustrative Problem –
Separate and
Consolidated FS
(Date of Acquisition)
M Y R N A L . D E S A B E L L E , C PA ,
MBA, PHD
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Illustrative Problems:
Full-Goodwill and Partial-
Goodwill Approach
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Full-goodwill Approach
(Fair Value Basis)
 when non-controlling interests are measured at fair value, goodwill attributable to non-
controlling interests will be recognized in the consolidated financial statements.
Under this basis, non-controlling interests comprise three components:
1. Share of book value of identifiable net assets of subsidiary;
2. Share (fair value minus book value) of identifiable net assets of subsidiary at
acquisition date; and
3. Share of goodwill in subsidiary at acquisition date
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Partial-goodwill Approach
(Proportional Basis of the Acquiree’s Identifiable Net Assets)
 when non-controlling interests are measured as a proportion of the acquiree’s identifiable

net assets.
Under this basis, non-controlling interests comprise the following components:
1. Share of book value of identifiable net assets of subsidiary; and
2. Share (fair value minus book value) of identifiable net assets of subsidiary at
acquisition date
Non-controlling interests share of goodwill is not recognized under the

proportional basis.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-1
QUESTION 1: HOW DO YOU COMPUTE FOR (1) GOODWILL AND (2) NON-CONTROLLING
INTEREST UNDER THE PROPORTIONAL BASIS (PARTIAL-GOODWILL APPROACH)?
GOODWILL COMPUTATION (PARTIAL-GOODWILL)

Fair value of subsidiary (80%)
Consideration transferred: CASH ₱10,000,000
Less: Book value of stockholders’ equity (net assets) –
SANTA Company (₱6,000,000 x 80%) (4,800,000)
Allocated excess 5,200,000
Less: Over/undervaluation of assets and liabilities
[(₱8,000,000 - ₱6,000,000) x 80%] (1,600,000)
Goodwill (partial) ₱3,600,000
Non-controlling interests share of

COLLEGE OF BUSINESS
goodwill is not recognized under the
MANAGEMENT AND proportional basis.
ACCOUNTANCY
CASE 2-1
NON-CONTROLLING INTEREST
Book value of stockholders’ equity of subsidiary ₱6,000,000
Adjustments to reflect fair value (over/undervaluation of
assets and liabilities) (₱8,000,000 - ₱6,000,000 ) 2,000,000
Fair value of stockholders’ equity of subsidiary 8,000,000
Multiplied by: NCI percentage 20%
NCI (partial) ₱1,600,000
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Illustrative Problem – Fair Value of Non-Controlling Interest in Subsidiary Not Given
CASE 2-1
ANGEL Company acquires 80% of SANTA Company for ₱10,000,000

carrying value of SANTA Company’s net assets at time of acquisition being
₱6,000,000 and fair value of these net identifiable assets being
₱8,000,000.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-1
INTEREST UNDER THE FAIR VALUE BASIS (FULL-GOODWILL APPROACH)?
GOODWILL COMPUTATION (FULL-GOODWILL)

Consideration transferred: CASH (₱10,000,000 / 80%) ₱12,500,000
Less: Book value of stockholders’ equity (net assets) – SANTA Company (₱6,000,000 x
100%) (6,000,000)
Less: Over/undervaluation of assets and liabilities [(₱8,000,000 - ₱6,000,000) x 100%] (2,000,000)
Goodwill (full) ₱4,500,000
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-1

100%) (6,000,000)
Note: It is assumed that if the parent would pay ₱10million for an 80% interest, then the entire
subsidiary company is worth ₱12.5million (₱10million /80%). This amount is referred to as the
COLLEGE OF BUSINESS
“implied value” of the subsidiary company – If the illustration is silent, this assumes that the price the
MANAGEMENT
parent wouldANDpay is directly proportional to the size of the interest purchased.
ACCOUNTANCY
CASE 2-1

100%) (6,000,000)
Note: The full-goodwill of NCI share on Goodwill

₱4,500,000 consists of Full-goodwill ₱4,500,000
COLLEGE OF BUSINESS Non-controlling interests
TWO PARTS which can be
Less: Controlling interest on full-goodwill share of goodwill was
MANAGEMENT AND (₱4,500,000 x 80% )
computed proportionately (3,600,000) recognized here unlike in
as to 80%:20% ratio.ACCOUNTANCY
NCI share on full-goodwill ₱900,000 the proportional basis.
CASE 2-1
NON-CONTROLLING INTEREST (FULL)

Add: NCI share on Full-Goodwill (₱4,500,000 –
3,600,000) 900,000
NCI (full) ₱2,500,000
Alternative computation for Non-Controlling Interest BUT ONLY APPLICABLE IF THERE IS NO CONTROL
PREMIUM (OR DISCOUNT) INCLUDED:

Fair-value of subsidiary (100%) ₱12,500,000
COLLEGEMultiplied
OF BUSINESS
by: NCI interest 20%
MANAGEMENT
NCI (full) AND ₱2,500,000
ACCOUNTANCY
What is Control Premium and
Control Discount?
QUESTION
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Control Premium
 an amount that a buyer is usually willing to pay over the current market price
of a publicly traded company.
 usually justified by the expected synergies such as expected increase in cash flow
resulting from cost savings and revenue enhancements achievable in the merger or
consolidation
 consideration transferred is more than fair value of non-controlling interest
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Control Discount
 often arises in a fire sale (when securities are traded well below their intrinsic
value/market value)
 fair market value is more than consideration transferred
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Illustrative Problem – Fair Value of Non-Controlling Interest in Subsidiary Given WITH
CONTROL PREMIUM
CASE 2-2
SANTA Company has 40% of its share publicly traded on an exchange. ANGEL
Company purchases 60% non-publicly traded shares in one transaction, paying
₱6,300,000. Based on the trading price of the shares of SANTA Company at the date
of gaining control a fair value of ₱4,000,000 assigned to the 40% non-controlling
interest (or fair value of non-controlling interest), indicating that ANGEL Company has
paid a control premium of ₱300,000.
The fair value of SANTA Company’s identifiable net assets is ₱7,000,000 and a
carrying value of ₱5,000,000.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-2

Consideration transferred: CASH ₱6,300,000
SANTA Company (₱5,000,000 x 60%) (3,000,000)
Less: Over/undervaluation of assets and liabilities
[(₱7,000,000 - ₱5,000,000) x 60%] (1,200,000)
This is the Goodwill
attributable to CONTROLLING
Goodwill (partial) ₱2,100,000 INTEREST.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-2
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-2
Consideration transferred: CASH (60%) ₱6,300,000
Fair value of NCI (given in the problem – 40%) 4,000,000
Fair value of subsidiary (100%) 10,300,000
Less: Book value of stockholders’ equity (net assets) – SANTA Company: (₱5,000,000 x
100%) (5,000,000)
Note: The full-goodwill of Since there is control premium paid by

₱3,300,000 consists of NCI share on Goodwill ANGEL, the goodwill attributable to ANGEL
TWO PARTS: COLLEGE OF BUSINESS
Full-goodwill ₱3,300,000 and the NCI are NOT proportional to each
MANAGEMENT AND
Less: Controlling interest on full- other (not divided into 60%:40%) Instead
ACCOUNTANCY goodwill / partial-goodwill (2,100,000) the actual PARTIAL-GOODWILL
NCI on full-goodwill ₱1,200,000
INTEREST is lifted.
CASE 2-2

NCI (partial) (₱7,000,000 x 40%) ₱2,800,000
Add: NCI share on Full-Goodwill (₱3,300,000 –
2,100,000) 1,200,000
NCI (full) ₱4,000,000
NOTE: Unlike as illustrated in CASE 2-1, the alternative computation of NCI is

NOT APPLICABLE due to the presence of control premium. The NCI as
computed using the fair value of subsidiary as computed amounted to
₱10,300,000, therefore, the resulting NCI of ₱4,120,000 (₱10.3 million x 40%) in
the alternative computation does not tally with the correct computed amount of
₱4,000,000.
COLLEGE OF BUSINESS
MANAGEMENT AND REMINDER: The amount of Goodwill that is allocated to the controlling and non-
ACCOUNTANCY controlling interest is based on the separate fair values of each of those
ownerships that may not correspond with the proportion of the subsidiary’s stock
that they own.
CASE 2-2
QUESTION 5: IF GOODWILL BECOMES IMPAIRED IN THE FUTURE, WHAT PERCENTAGE BASIS
WILL BE USED IN ALLOCATING IMPAIRMENT TO CONTROLLING INTEREST AND NON-
CONTROLLING INTEREST?
Value % of Total
Goodwill applicable to parent ₱2,100,000 63.64%
Goodwill applicable to NCI 1,200,000 36.36%
Total (FULL) Goodwill ₱3,300,000 100.00%
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Continuation of CASE 2-2
Assume the price paid amounted to ₱6,294,000 which includes control premium of ₱294,000 with no fair value of non-controlling interest
given.
QUESTION 6: WHAT IS THE AMOUNT OF FULL-GOODWILL BASED ON THE FAIR VALUE BASIS
(FULL-GOODWILL APPROACH)?

NCI share on Goodwill
Consideration transferred: CASH (100%) [(₱6,294,000 - Full-goodwill ₱3,294,000
₱294,000) / 60%] ₱10,000,000 Less: Controlling interest on full-
Add: Control Premium 294,000 goodwill / partial-goodwill
[₱6,294,000 – (₱5,000,000 x
Fair value of subsidiary (100%) 10,294,000 60%) – (₱2,000,000 x 60%)] (2,094,000)
Less: Book value of stockholders’ equity (net assets) – SANTA NCI on full-goodwill ₱1,200,000
Company: (₱5,000,000 x 100%) (5,000,000)
Less: Over/undervaluation of assets and liabilities [(₱7,000,000
- ₱5,000,000) x COLLEGE
100%] OF BUSINESS (2,000,000) Consideration transferred LESS (Book
Goodwill (full) MANAGEMENT AND ₱3,294,000 Value x 60%) LESS (Over/Undervaluation
ACCOUNTANCY of assets and liabilities X 60%)
Illustrative Problem – Fair Value of Subsidiary Given
CASE 2-3
On September 1, 2021, ANGEL Company acquires 75% (750,000 ordinary shares) of

SANTA Company for ₱7,500,000 (₱10 per share). In the period around the
acquisition date, SANTA Company’s shares are trading about ₱8 per share. ANGEL
Company pays a premium over market because of the synergies it believes it will get. It
is therefore reasonable to conclude that the fair value of SANTA as a whole may not
be ₱10,000,000. In fact, an independent valuation shows that the value of SANTA
Company is ₱9,700,000 (fair value of SANTA Company).
Assume the fair value of the net assets acquired is ₱8,000,000 and carrying value is
₱6,000,000.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-3
QUESTION 7: HOW WILL YOU COMPUTE FOR (1) GOODWILL AND (2) NON-CONTROLLING

SANTA Company (₱6,000,000 x 75%) (4,500,000)
Less: Over/undervaluation of assets and liabilities This is the Goodwill
[(₱8,000,000 - ₱6,000,000) x 75%] (1,500,000)
Goodwill (partial) ₱1,500,000 INTEREST.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-3
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-3
100%) (6,000,000)
Note: The full-goodwill of

₱1,700,000 consists of
TWO PARTS: NCI share on Goodwill
COLLEGE OF BUSINESS
Full-goodwill ₱1,700,000
MANAGEMENT AND
Less: Controlling interest on full-
ACCOUNTANCY goodwill / partial-goodwill 1,500,000
NCI on full-goodwill ₱200,000
CASE 2-3

NCI (partial) (₱8,000,000 x 25%) ₱2,000,000
Add: NCI share on Full-Goodwill (₱1,700,000
full goodwill – 1,500,000 partial goodwill) 200,000
NCI (full) ₱2,200,000
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Can the acquirer obtain control
of the acquiree in stages?
QUESTION
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
YES. Business combinations can
be achieved in stages. This is
usually referred to as “Step
Acquisitions”.
QUESTION
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Step Acquisition
 also known as ‘piecemeal acquisition’, is a business combination in which an
acquirer obtains control over acquiree through multiple transactions at different
dates.
 when acquirer obtains control of the acquiree, it remeasures any investment

previously held to fair value and consolidates the acquirer moving forward.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
PFRS 3 states that prior to control being obtained, an aquirer accounts for its
equity investment in an acquiree in accordance with the nature of the
investment by applying the relevant standards:
• A financial asset under PFRS 9,
• An associate under PAS 28
• Joint arrangements under PFRS 11
The principles to be applied are:
• A business combination occurs only in respect of the transaction that
gives one entity control of another;
• The identifiable net assets of the acquiree are remeasured to their fair
value on the date of acquisition (i.e. the date that control passes)
• Non-controlling interests are measured on the date of acquisition under

one of the two options permitted by PFRS 3 (fair value basis – option 1,
or proportionate basis – option 2)
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Step Acquisition
Measurement Guide
15%of 75%of
shares shares
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Illustrative Problem – Step Acquisition: Fair Value of Non-Controlling Interest of the
Acquiree/Subsidiary and Fair Value of Any Previously Held Equity Interest in the
Acquiree/ Subsidiary
CASE 2-4
ANGEL Company acquires 15% of SANTA Company’s common stock for ₱500,000
cash and carries the investment as FVTOCI investment.
A few months later, ANGEL Company purchases another 60% of SANTA Company’s
stock for ₱2,160,000. At that date SANTA Company reports identifiable assets with a
book value of ₱3,900,000 and a fair value of ₱5,100,000, and it has liabilities with a
book value and fair value of ₱1,900,000.
The fair value of the 25% non-controlling interest in SANTA Company is ₱900,000.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-4

Add: Fair value of previously held equity interest in acquiree (15%) (₱2,160,000/60%
=₱3,600,000 x 15% ) 540,000
Fair value of subsidiary (75%) 2,700,000
75%) (1,500,000)
Less: Over/undervaluation of assets and liabilities [(₱5,100,000 - ₱1,900,000) –
(₱3,900,000 - ₱1,900,000)] x 75% (900,000)
Goodwill (partial) ₱300,000
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-4
NCI (partial) ₱800,000
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-4

NCI share on Goodwill
Add: Fair value of previously held equity interest in acquiree
Full-goodwill ₱400,000
(15%) (₱2,160,000/60% =₱3,600,000 x 15% ) 540,000
Less: Controlling interest
Add: Fair value of NCI (given) (25%) 900,000
on full-goodwill / partial-
Fair value of subsidiary (100%) 3,600,000 goodwill 300,000
Less: Book value of stockholders’ equity (net assets) – SANTA NCI on full-goodwill ₱100,000
Company: (₱2,000,000 x 100%) (2,000,000)
Less:COLLEGE OF BUSINESS
Over/undervaluation of assets and liabilities [(₱3,200,000
– ₱2,000,000)
MANAGEMENTx 100%] AND (1,200,000)
ACCOUNTANCY
Goodwill (full) ₱400,000
CASE 2-4

NCI (partial) (₱3,200,000 x 25%) ₱800,000
Add: NCI share on Full-Goodwill (₱400,000 full
goodwill – ₱300,000 partial goodwill) 100,000
NCI (full) ₱900,000
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
In general, a change in in ownership leading to a change in the nature of an
investment is reported as a deemed sale of the existing investment at fair value,
and as a deemed purchase of the new investment, again at fair value.
The new investment is reporting using appropriate reporting method. However,

differences in practice exist when accounting for a change in the nature of an
investment from passive to an investment in an associate, joint venture or
control.
These differences in practice exist because PAS 28 is silent on the appropriate
accounting method for step acquisition. One valid practice is to follow the
deemed sale/purchase at fair value approach applicable to other types of
changes in the nature of the investment.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Rule as a Financial Asset:
• An equity interest previously held by the acquiree which qualified as a financial

instrument under PFRS 9 is treated as if it were disposed of and reacquired at fair
value of the acquisition date, depending on whether the investment ( financial asset)
is a:
Fair value
The remeasurement to its acquisition-date fair value and any
through profit or resulting gain or loss is recognized through profit or loss.
loss (FVTPL)
Fair value
through other The remeasurement to its acquisition-date fair value and any
resulting gain or loss is recognized in other comprehensive
comprehensive income.
income (FVOCI)
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Illustrative Problem – Step Acquisition: Fair Value of Non-Controlling Interest of the
Acquiree/Subsidiary and Fair Value of Any Previously Held Equity Interest in the
Acquiree/ Subsidiary
CASE 2-4
cash and carries the investment as FVTOCI investment.
A few months later, ANGEL Company purchases another 60% of SANTA Company’s
stock for ₱2,160,000. At that date SANTA Company reports identifiable assets with a
book value of ₱3,900,000 and a fair value of ₱5,100,000, and it has liabilities with a
book value and fair value of ₱1,900,000.
The fair value of the 25% non-controlling interest in SANTA Company is ₱900,000.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Continuation of CASE 2-4
QUESTION 11: HOW IS THE GAIN ON DEEMED SALE – OCI COMPUTED BY THE ACQUIREE?
WHAT IS THE ENTRY TO RECORD THIS GAIN ON DEEMED SALE?
To record transaction deemed as sale and gain on
deemed sale:
OCI – Gain on remeasurement to FV (Gain on Deeemed Accounts (Books of SANTA) Debit Credit
Sale): Investment in ANGEL Company ₱2,700,000
Fair value on previously held equity Investment in ANGEL
interest in acquiree (₱2,160,000/60%
Company (FVTOCI) ₱500,000
=₱3,600,000 x 15% ) ₱540,000
Less: Carrying/ book value at the Cash 2,160,000
point control is achieved (given) 500,000 OCI (Gain on deemed
OCI – Gain on remeasurement to FV sale) 40,000
(gain on deemed sale) ₱40,000
Note 1: Case 2-4 is an example in which an equity interest previously

held and qualified as FVTOCI investment and is being remeasured to
its acquisition date fair value and any difference is recognized in
Other Comprehensive Income (OCI).
COLLEGE
Note 2: if the Investment OF BUSINESS
is classified as FVTPL
investment, theMANAGEMENT AND
difference in remeasurement gain is The new purchase changed the nature of the Investment from Fair
ACCOUNTANCY
recognized in profit or loss to be included in the Value to CONTROL, the acquiree company (SANTA) has to act as if
determination of net income. there is a deemed sale of its existing investment in the acquirer
(ANGEL) and a deemed purchase of its now 75% interest in SANTA.
NOTE:
The fair value gains and losses of FVTOCI investment can never be transferred
from their separate component of equity to net income.
However, the company can move the accumulated gains and losses within
stockholders’ equity. That means that the company can transfer the gains and
losses directly to retained earnings at any time, but not via the profit and loss
section of the statement of comprehensive income.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
Illustrative Problem – Bargain Purchase Gain
CASE 2-5
cash. At that date, the non-controlling interest in SANTA has a book value of ₱52,500
and a fair value of ₱82,000. Also on that date, SANTA reports identifiable assets with a
book value of ₱400,000 and a fair value of ₱510,000, and it has liabilities with a book
value and fair value of ₱190,000.
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY
CASE 2-5
QUESTION 12: HOW DO YOU COMPUTE BARGAIN PURCHASE GAIN USING PARTIAL GOOD-
WILL APPROACH?
BARGAIN PURCHASE GAIN (PARTIAL-GOODWILL)

Consideration transferred: CASH (75%) ₱225,000
Less: Book value of stockholders’ equity (net assets) – SANTA Company: (₱400,000 -
₱190,000) x 75% (157,000)
Allocated excess 67,500
Less: Over/undervaluation of assets and liabilities [(₱510,000 - ₱190,000) – (₱400,000 -
₱190,000)] x 75% (82,500)
Negative Excess: Bargain Purchase Gain (to controlling interest or attributable to PARENT
ONLY) (₱15,000)
COLLEGE OF BUSINESS
NOTE: PFRS 3 states that a gain on a bargain purchase can ONLY be recognized by the acquirer. This
MANAGEMENT AND
implies that only the parent’s share of the negative goodwill can be recognized. Bargain Purchase Gain has
no effect on the calculation of the NCI share of equity. The NCI receives a share of the fair value of
ACCOUNTANCY
subsidiary, and has NO INVOLVEMENT with the bargain purchase gain.
CASE 2-5
QUESTION 12: HOW DO YOU COMPUTE BARGAIN PURCHASE GAIN USING PARTIAL GOOD-
WILL APPROACH?
BARGAIN PURCHASE GAIN (FULL-GOODWILL)
Consideration transferred: CASH (100%) ₱225,000
Fair value of non-controlling interest (given) 82,000
Fair value of subsidiary 307,000
Less: Book value of stockholders’ equity (net assets) – SANTA Company: (₱400,000 -
₱190,000) x 100% (210,000)
Allocated excess 97,000
Less: Over/undervaluation of assets and liabilities [(₱510,000 - ₱190,000) – (₱400,000 -
₱190,000)] x 100% (110,000)
Negative Excess: Bargain Purchase Gain (to controlling interest or attributable to PARENT
ONLY) (₱13,000)
COLLEGE OF BUSINESS
MANAGEMENT AND
NOTE: The amount in the Fair Value of NCI should NOT BE LOWER compared to fair value of NCI in
Stockholders’ Equity ACCOUNTANCY
of Subsidiary (i.e. [(₱510,000 - ₱190,000) – (₱400,000 - ₱190,000)] x 25% =
₱80,000]. Otherwise, the higher amount should be used.
The standard setters adopt the view that most business combinations are an
exchange of equal amounts given markets in which the parties to the business
combinations are informed and willing participants in the transaction. Therefore,
the existence of a bargain purchase is expected to be an unusual or rare
event.
Paragraph 36 of PFRS requires that before a gain is recognized, the acquirer must
reassess:
• It has correctly identified all the assets acquired and liabilities assumed;
• It has correctly measured at fair value all the assets acquired and liabilities
assumed;
• There is non-controlling interest in the acquiree (subsidiary), if any;
• If is for a business combination achieved in stages, the acquirer’s (parent)
previously-held equity interest in the acquiree; and
• It has correctly measured the consideration transferred.
The objective here is to ensure that all the measurements at acquisition date
reflect all information
COLLEGE that are available at that date.
OF BUSINESS
MANAGEMENT AND
Note:ACCOUNTANCY
A Gain on Bargain Purchase and Goodwill cannot be recognized in the same business
combination. Goodwill cannot be recognized if there is a bargain purchase gain.
END
COLLEGE OF BUSINESS
MANAGEMENT AND
ACCOUNTANCY

ACTBC Illustrative Problems - Full Goodwill Approach and Partial Goodwill Approach

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ACTBC Illustrative Problems - Full Goodwill Approach and Partial Goodwill Approach

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Accounting for

Under this basis, non-controlling interests comprise three components:

1. Share of book value of identifiable net assets of subsidiary;

3. Share of goodwill in subsidiary at acquisition date

 when non-controlling interests are measured as a proportion of the acquiree’s identifiable

Under this basis, non-controlling interests comprise the following components:

1. Share of book value of identifiable net assets of subsidiary; and

Non-controlling interests share of goodwill is not recognized under the

GOODWILL COMPUTATION (PARTIAL-GOODWILL)

Non-controlling interests share of

ANGEL Company acquires 80% of SANTA Company for ₱10,000,000

GOODWILL COMPUTATION (FULL-GOODWILL)

GOODWILL COMPUTATION (FULL-GOODWILL)

GOODWILL COMPUTATION (FULL-GOODWILL)

Note: The full-goodwill of NCI share on Goodwill

NON-CONTROLLING INTEREST (FULL)

NON-CONTROLLING INTEREST (FULL)

 consideration transferred is more than fair value of non-controlling interest

 fair market value is more than consideration transferred

GOODWILL COMPUTATION (PARTIAL-GOODWILL)

Note: The full-goodwill of Since there is control premium paid by

NON-CONTROLLING INTEREST (FULL)

NOTE: Unlike as illustrated in CASE 2-1, the alternative computation of NCI is

GOODWILL COMPUTATION (FULL-GOODWILL)

On September 1, 2021, ANGEL Company acquires 75% (750,000 ordinary shares) of

GOODWILL COMPUTATION (PARTIAL-GOODWILL)

Note: The full-goodwill of

NON-CONTROLLING INTEREST (FULL)

 when acquirer obtains control of the acquiree, it remeasures any investment

• Non-controlling interests are measured on the date of acquisition under

GOODWILL COMPUTATION (PARTIAL-GOODWILL)

GOODWILL COMPUTATION (FULL-GOODWILL)

NON-CONTROLLING INTEREST (FULL)

The new investment is reporting using appropriate reporting method. However,

• An equity interest previously held by the acquiree which qualified as a financial

Note 1: Case 2-4 is an example in which an equity interest previously

BARGAIN PURCHASE GAIN (PARTIAL-GOODWILL)

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