STEP

ACQUISITION

1. TANJIRO Company's stockholder's equity as of December 31, 2019 is P7,308,000.
On January 1, 2020 TANJIRO acquired 30% of INOSUKE Company's ordinary shares
for P540,000 cash and by issuing its own shares with a fair value of P1,350,000.

TANJIRO acquired significant influence over INOSUKE as a result of the stock acquisition. On
May 1 2020, TANJIRO purchased another 60% of INOSUKE's ordinary shares for a cash
payment of P3,942,000.

On this date, INOSUKE reports identifiable assets with a carrying value of P6,480,000 and fair
value of P11,520,000 and it has liabilities with a book value and a fair value of P3,240,000.
(NA FV = 8.280m)

Immediately before the acquisition on May 1, net loss reported by INOSUKE for the *four-
month ended April 30, 2020 amounted to P900,000.

*4 month ended kaya d na tayo nag times 4/12

The fair value of the 10% non-controlling interest is P1,296,000. Non-controlling interest is
valued using the proportionate basis.

TANJIRO also paid the following: P90,000 for legal fees, P72,000 for finder's fee, P77,400 for
accountant's fee, P64,800 for audit fee for SEC registration of stock issued and P19,800 for
printing of stock certificates.
(Direct = 239,400 SIC = 84,600)

Immediately after business combination, how much is the consolidated total equity?

*Do not forget about the share in P/L and the gain on remeasurement it is included in the
computation of RE.

2. On January 1, 2020, NEZUKO Corporation acquired 40% interest in ZENITSU Company for
P24 Million. NEZUKO has already held a 25% interest which had been acquired for P8
Million. The fair market value of the non-controlling interest on this date amounted to
P12 Million (35%)and the fair market value of the net assets of ZENITSU was P42 Million.

What is the result of business combination?


IAS 28 Inv in Associates-Equity Method

BOOKS OF TANJIRO(Investor)

JOURNAL ENTRIES

To record purchase of 30%
2020
Jan-01 Investment in Associates 1,890,000.00
Cash 540,000.00
Share Capital 1,350,000.00

To record share in net loss (900,000 x 30%)

Apr-
30 Share in Net Loss(P&L) 270,000.00
Investment in Associates 270,000.00

Inv in Assoc.
Share in NI

=
1,890,000-270,000=1,620,000 – 1,971,000 351.000GAIN
To record investment in subsidiary and eliminating Investment in Associates



May-1 InvestmenT in Subsidiary(90%) 5,913,000*

Investment in Associates 1,620,000.00

Cash(60%) 3,942,000.00

Gain on remeasurement of Investment(P&L) 351,000.00


*P3,942,000/60%=P6,570,000 x 30% = P1,971,000
P1,971,000 + P3,942,000 = P5,913,000
30% +60%


Expenses 239,400.00


SP 84,600.00
Cash 324,000.00

TANJIRO Company's stockholder's equity as of December 31, 2019 is P7,308,000. On January
1, 2020 TANJIRO acquired 30% of INOSUKE Company's ordinary shares for P540,000 cash and
by issuing its own shares with a fair value of P1,350,000. TANJIRO acquired significant influence
over INOSUKE as a result of the stock acquisition. On May 1 2020, TANJIRO purchased another
60% of INOSUKE's ordinary shares for a cash payment of P3,942,000. On this date, INOSUKE
reports identifiable assets with a carrying value of P6,480,000 and fair value of P11,520,000 and
it has liabilities with a book value and a fair value of P3,240,000. 11,520,000-
3,240,000=8,280,000

Identifiable NA, FV 8,280,000x 10%=828,000

Immediately before the acquisition on May 1, net loss reported by INOSUKE for the four-month
ended April 30, 2020 amounted to P900,000. The fair value of the 10% non-controlling interest is
P1,296,000. Non-controlling interest is valued using the proportionate basis. TANJIRO also paid
the following: P90,000 for legal fees, P72,000 for finder's fee, P77,400 for accountant's fee,
P64,800 for audit fee for SEC registration of stock issued and P19,800 for printing of stock
certificates.


SHAREHOLDERS' EQUITY,books of Tanjiro
Jan-01 BEGINNING BALANCE PER TANJIRO'S BOOK(Parent) 7,308,000.00
SHARE ISSUANCE 1,350,000.00
Apr-30 Investment Loss (270,000.00)
May-01 SP (84,600.00)
Gain on remeasurement of Investment 351,000.00
Acquisition-related Expenses (239,400.00)
May-01 ENDING BALANCE PER TANJIRO'S BOOKs 8,415,000.00

Determination and Allocation

Schedule
100% 90% 10%

Aggregate 6,741,000.00 5,913,000.00 828,000.00

Fair Value of Net Assets 8,280,000.00 7,452,000.00 828,000.00

Goodwill/(Gain) (1,539,000.00) (1,539,000.00) -

CONSOLIDATION
May-01 ENDING BALANCE PER TANJIRO'S BOOK 8,415,000.00
GAIN from BP(WP) 1,539,000.00


NON-CONTROLLING INTEREST(WP) 828,000.00

CONSOLIDATED SHAREHOLDERS' EQUITY 10,782,000.00

On January 1, 2020, NEZUKO Corporation acquired 40% interest in ZENITSU Company for P24
Million. NEZUKO has already held a 25% interest which had been acquired for P8 Million. The fair
market value of the non-controlling interest on this date amounted to P12 Million and the fair
market value of the net assets of ZENITSU was P42 Million.

2. What is the result of business combination?
ANSWER: 11,700,000 Goodwill

PRICE PAID @ 40% 24,000,000.00

FV OF PREVIOUSLY HELD EQUITY @25% 15,000,000.00
COST OF INVESTMENT @ 65% 39,000,000.00

100% 65% 35%

Cost of Investment 53,700,000.00 39,000,000.00 14,700,000.00
Fair Value of Net Assets 42,000,000.00 27,300,000.00 14,700,000.00
Goodwill/(Gain) 11,700,000.00 11,700,000.00 -

Question: what if NCI is based on FV Assumption. Will I use ( FV INV SUB including Prev FV of issuance)?