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ABC-BUSINESS COMBINATION FOR SME's
ABC-BUSINESS COMBINATION FOR SME's
Direct costs
https://www.youtube.com/watch?v=79rh8Q0Jq
Xc&t=334s Remeasurement × Goodwill √ Goodwill
of contingent
MODULE 3: BUSINESS COMBINATION FOR consideration
SMEs after
measurement
SMALL AND MEDIUM SIZED ENTITIES
period
- Quantitative threshold:
Assets = P3,000,000 to Identifiable Contractual FV can be
P350,000,000; or intangible or separable measured
Liabilities = P3,000,000 to assets, reliably
P250,000,000 recognized if:
- Not in the process of issuing instruments in
a public market; Contingent Present FV can be
- Not required to file FS under the SRC Rule liabilities obligation & measured
68, Part II (issuers of securities to the recognized if FV measured reliably
reliably
public);
- Not a holder of a secondary license issued Goodwill Consideration Consideration
by a regulatory agency; Transferred Transferred
Secondary License – is the
registration which gives a + NCI -%FVNAA
‘corporation’ a license or authority to + PHEI
engage in regulated activities like
being a securities broker, dealer, -FVNAA
stock exchange, investment houses,
Goodwill – Not Amortized
financing companies, lending
companies, etc. subsequent amortized; over useful
life;
- Not a public utility Tested for
EXEMPTIONS TO PFRS FOR SMEs impairment at Not to exceed
least annually 10 years
- Part of a group reporting under full PFRS
(e.g., subsidiary, parent, joint venture, Measurement of FV or PS PS
associate, branch office); NCI
- Subsidiary of a foreign parent company
moving towards IFRS;
- Projected to breach quantitative threshold; PROBLEM 1: SMEs – STOCK ACQUISITION
- Plans to conduct IPO within 2 years. P Company, an SME, issued 120,000 shares of
DIFFERENCES VS FULL PFRS P25.00 par value ordinary shares for 90% of the
outstanding stock of S Company in business
FULL PFRS PFRS for combination on July 1, 2020. P Company’s ordinary
SMEs shares were selling at P40.00 at the date of
acquisition. The fair value of S net assets was
Method of Acquisition Purchase
P4,000,000. Out of pocket costs of business
accounting method method
combination were as follows:
Consideration Acquisition Acquisition
Legal fees for the business combination,
transferred cost + cost +
P12,000
Contingent Contingent
Consideration Consideration Printing cost for stock certification, P9,400
(if probable & Finder’s fee, P27,000
reliably CPA audit fees for business combination,
P19,000
A contingent consideration which is probable and CPA audit fees for business combination,
can be reliably estimated amount to P18,200. P19,000
1. Cost of investment in S Company A contingent consideration which is probable and
can be reliably estimated amount to P18,200.
No. of shares issued by Acquirer 120,000sh
FV per share P40.00 1. Consideration Transferred
FV of issued shares 4,800,000
Direct Costs (12k+27k+19k) 58,000 No. of shares issued by Acquirer 120,000sh
Contingent Consideration 18,200 FV per share P40.00
Cost of Investment 4,876,200 FV of issued shares 4,800,000
Direct Costs (12k+27k+19k) 58,000
Contingent Consideration 18,200
Cost of Investment 4,876,200