tlftF-t4

ReSA
The Revieut Schoal of Accauntancy
R. Papa cor. S, H" Loyola Sts. Sampaloc, Mla.
]Tel. No. 735-98O2 & 734'39iftg
Advanced Financial Accounting Separate and ConsoJ.idated
& Reporting Finaneia]. Statements

objectives:
PAS 27 objective of setting the standard to he. applied:
r i-n accountinq for investments in subsidiaries, jointly controlled
enti-ties, and associates when an entity eLects, or is requirec b1'
,.1-ocal- regulations, to present separaLe (non-consolidated)
f inancial s!atement s..
PER.S 10 objective of setting the standard to be applled:
i in the prepa'ration and presentation of consolidatecl financial
statements for a group of entities under the cbntrol- of a parent,'
and
The Concept of Control
Consolidation is the process of combining the assets, llabllities,
earnings and cash flows cf a parent and j-ts subsidiaries as if they
were one economic entitlz. Since an econcmic: arrd not legal cerspec!ir,'e
is aciopted, transactiols between companfes'rv::i:in thrs econor,j-c er--tity
and -.heir resu,tar:: ba-a:::es riust be eilninate j. A parent is ar e:t-lt','
tia-- ccn'"rcis 3i:e Ci :c:e sul>sidiaries. A group :.s a pareil: ai:: ai' l--s
subs. d- a::es.
Control as the Cri-teaon for Consolrdation
A subsrdrary is cefir:e: as a,-. entj--LJ;1a::s ccn;rc*-ec L: ai,j::,e:
entity, the parent. The criterj-on for identifyi-ng a parent-subsidiary
relationship, anC hence the basi-s for cclrs.il:.daticit ..s: ccnl ro-l - Tre
oecerrninatic:r ci whethe: ct-:e e:t'a' t'-' ccnc::- s ail :i,l--e: i' - l-e:- -,: . i - :
:-heie:e:=::.a--::i..:1;:..::.=:.::E.e.s:.::..:c:e=a:
i::':aic' al sta:e:r.e::--s .
PEtsS 10 Gurdance on Control
An investor deterrrines whe--her 1i' as a Dal:e::-- a'i assessl:lg i;:-e::-er :--
controls one cr rr.cte lnve-<tees . An i r:ves:c r ccns i ders ali 16 . 3:.r211
facts and circumstances when assessing whether i1-- controls an investee.
An investor controls an investee when it is exposed, or has rights, to
variable returns from it.s involvement wii-h the investee and has the
ability to affect lhose returns through its power over the investee.
PFRS 10 uses controf as the single basis for consolidatlon. An investor
qontrols an investee if and only i-f Lhe investor has arl cf the
following three elements of control:

Power over the investee. Power is the ;rbrlity to direct those

activities which significantly affect the investee's reIurns.. I1-
arises from rights, which may be straightforward (e-q. thrcuEh
voting rights) or complex (e.g. through one or more contractual
arrangements).

Exposure, or rights, to variable returns f rorn involvernent with

the i-nvestee returns musL have the potential to.vary as a result
of the investee's performance anC can be positive, negative cr
both. .1 l'r
I'l I,:"';', .'
li lfit
',tF t
The ability to os€r power or/er the invesLee to affeett'i:e-- amount
of the investor' s returns. r-\
l-\f (i r
-l
('l r
: .' l,r
f*( ', ',i'
{I riI il,' (r(
I
t--
l ./!-- AgA,R -a'9-__',)
,,
.fd,ralrced ltinanciaf- Aceounting e Rcporting pagG 2
!3eparate FLnaneial S'uateneats of ttre parent Grtr rnvGstor in an
.lssociate or .Ioint1y Controll.ed Entity
In the Parent's/investor's indivj-dual financial statements, irlwestments
in subsidiaries, associates, and jointly controlled entities should be
accounted for either:
. at cost; or
. in accordance with PAs 39 / PFRS 9 (effective .January 1, 2o1g)
Using eguity method as described in pAS 2g
Such investments maf not be accounted. for by tIrc equi*yr ae*hod in the
parent's,/investor's separate statements.
As a consequencer in May 2OOBt t.he IASB issued amendments to IAS (pAS)
27 relating to the cost of investment in a subsj-di-ary. jointly
controlled entity or associate. These amendments:
r deleted the definiti-on of the cost method from rAS (pAS) 27
. inserted paragraph 38A into rAS (pAS) 27. paragraph 3BA states
that:
se"a en'Xibyr sha77 recogaize a diridend. tra a atbsidiaryr,
jointay'colatr.of-l.ed atitxr. or associate in profit or ross
ia it.s segtaraXe finantcial .staterzeat.s ihen it.s right to
recei_ve tlte diwidead.s is estabTisheda.
The effect of these changes is that a1l dividends paid or payable by a
subsidj-ary to a parent. are to be recognized as revereue b1r the parert-
As noted in paragraph BC66II of the Basis of Conclusions to the
amendments, 'the requi-rement to separate the retained earnj-ngs of an
entity into pre-acquisition and posts*acguisition components as a
method for assessing whether a dividend is a recowery of its associated
investment' has been removed from IFRSs, (pFRSs, )
rAs (PAs) 27 does not define what is meant by .cost, except in the
specific set of circumstances of, certain types of group reorganization
and in flrst-time transition to rrRs (PFRS). rAs (pAs) g r Accounting
Policies, changes in Estimates and. Errors requires that in the
absence of a specific guidance on IFRS (PFRS), marragement should first
refer to the requirements and guidance in rFRS (PFRS) dearing with
similar and re].ated issues.
Another point of reference might be IAS (pAS) 32 - Financial
rnstruments: Presentation - and rAs (pAs) 39. rnvestments in
subsidiaries, assocj-ates and joi-nt ventures, whil-e outside the scope of
IAS {PAS) 32 and IAS (PAS) 39, are cl.ear1y financial assers (and
therefore financial instruments) as defined in those standards.
Instead of the nov dei-eted definitioa of cost mei-hcd,r entities are nov.
obliged to aPply a tro-.stagre Process. once recognized, all di-vidends
are taken to j-ncome and the Parent must now d.etermine whether or not
the investment has been impafred as a result.. This list of indicators
of irnpairment in IAS (PAS) 36 as amended includes the receipt of a
dividend from a subsidiary, jointly controlled entity or associate
where there is evidence that,:
1 - the dividend exceeds the total comprehensive income of the
subsidiary. jointry controrred ent.ity or associate in the
period dividend i-s declared; or
2. the carrying amount of . the investment in the separate
financial statements exceeds the carrying amounts in the
consolidated financial statemdnts of the investee, s net
assets, including associated goodwill.
Prcscntation of, ConsoLidatcd Financial statemcnts
A Parent is reguired to Present consolidated financial statements j-n
which it consolidates its investment.s in subsidiaries except in one
circrrmstance: A Parent need not presenL consolidated financial
statements if and only if aII of the foll-owing four condj-tions are met:

AFen-09
Advanced Financia1 Accounting & Reporting Page 3
1. The parent is itself a wholly-owned subsj-diary, or is a
partially? owned subsidiary of another entity and its other
owners, includj-ng those not otherwise entitled to vote, have been
j-nformed about, and do not object to,. the parent not presenting
consolidated financial st-atements;
2 - The parent's debt or equity instruments are not traded in a
publ ic market,'
3. The parent did not file, nor'is lt in the process of filing, its
financial statemerrts with a securities commission or other
regulatory organiz;rtion for the purpose of issuing any cfass of
instruments in a public market,' and
4. The ultj-mate or any intermediate parent of the parenL produces
consolidated financial statements available for public use that
comply with International Einancial Reporting Standards -
once an investment ceases to fall within the definition of a
subsidi-ary, it should be accounted for as an associate under PAS 28, as
a joint venture under PFRS -11 or as an i-nvestment under PAS 39, as
approprlate.
Furthermore; investments in subsidiaries, jointly controlled entities
and associates that are accounted for in accordance with PAS 39 in the
consolidated financial statements are to be .accounted for in the same
way in the investor's separate financial statements and in the
financial statements of a parent that need not present consolidated
financial statements.
For the fcregoi-ng reason, the following disclosures have to be made in
the j-nvestor's separate financial statements and in the financial"
statements cf a parent that need not present consolidated financj-aI
statements:
The reasons why separate financial- statements are prepared;
The rame of the lmmediate or ultimate. parent and a reference to
the consolidat-ed financial statements and,lor the financial
stra!ements j-n which associates and . jointly controlled entities
are accounted for under the eguity method or proportionate
consoiidation method in accordance with PAS 28 and Pf'Rs ll,
respectively; and

3. A description of the method used to account for invesLments in

subsidiaries, associates and jointly controlfed entities.
In acidition to the foregoing elective option to not present
consoLidated f inancial- rstatemen+-s, PAS 27 essentially continues the
eari-ier standard's' pr.ohlbition based on absence of control over a
subsidlary. Consolidated financial statements are to consolidate a
parent and all of its subsiciiaries, foreign and domestic, when those
entities are controll-ed by the parent. For this determination, control
is presumed to exist when the parent ol^Ins, directly or indirectly
through subsidiaries, more than one-half of the voting power of an
entity unless. in exceptional circumstances, it can be.clearly
demonstrated that such ownership does not constitute control.

Consolidation Procedures
Worksheet entries at ttre acquisition date.
The consofidation process does not result in any entries being made in
the actual records of either the parent or the subsidiary. The
adjustment entries are made in the consolidation worksheet prepared,
and these entries change over tiroe- In the rest of this section, the
adjustment entries that would be passed in a consolidation worksheet
prepared immediately after the acguisition date are analyzed.

AEAR-o9
ldvanced Einanrcia^X- .eceountirlgl e Irclxrrtirlg
l>agc I
Pre-acquiaition elrtriea
As noted in paragraph 15 of PAS 27, the pre-acgui-sitiori are reguj-red t.o
el-iminate the carrying arnount of the parent, s investment in the
subsidiary and the parent's portion of pre-acquisition equity. The pre-
acgui.sition entries then involwe three areas:
e The inwestment account, _ shares in subsidiary, as shown in the
financia1. statements of the parent.
r The equity of the subsi-diary at the acquisition date (the pre-
aegui-sition equity). The pre-acquisition equity is not just the
eguity recorded by the subsidiary but j-ncludes the business
combination valuation reserve recognize<l on consolidation wia the
valuati-on . entries. Because the accounts containing pre-
acquisiti-on eguity may clrange ovex tj-me as a result of divid.Lnds
and reserve transfer, more than one pre-acguisition entry may be
required in a .particular year.
o Recognition of goodwill- Note that, as stated in paragraph 21 of
PAS 12 Income Taxes, there is no recognition of a deferred tax
liability in relation to goodwill because goodwill is a residual,
and the recognition of a deferred tax liability would increase
its carrying amount.
CaJ-su-I-ating tlra NCI alrare of equity
Noncontrolling interest in the net assets consists of:
r the amount of those noncontrolling interests at the date of the
"original combination calculated in accordance wi_th PFRS 3
Revised,. and
r the noncontrolling's strare of changes in equity since the date of
the combination-
rn relation to part (ii), changes inequity since the acquisition date
must be taken into account. Nole that these changes are not only in the
recorded eguity of the subsidiary, but they also relate to other
changies in conso]-idated eguity. As noted earlier in this chapter, the
NCI is entitled to share consolidated equity under the entit) coacq>t
of co,asof-irTatiott- This requires taking into account adjustments for
profits and losses are not recognized by the group.
The carculation of the NCr is therefore done in two stages: (1) the NCr
share of recorded equity is determi-ned, and (2) this
for the effects of intragroup transactions. "h-=. is adjusted

Noncontrolling gtra.re of recorded equiw of tha subaidia.rl,

The eguity of the subsidiary consists of the equit contained in the

actual records of the subsidi-ary as well as any business combination
valuation reserves created on Jonsolidation at the acquisition date,
where the identifiable assets and liabilities of the subsidiary ale
recorded at amounts different from their fair. varues. ?he NCr is
entitled to a share of subsidiary equity at balance date, which
consists of t.he eguity on hand at acguisition date plus any changes i_n
that equity between acquisi-tion date and reporting date. The
calculation of the NCr share of equity at a point in time is done in
three steps:
1. Determine the NCf share of equity of the subsidiary at
acquisition date.
2. Determine the NCl share of the change in subsidiary equity
between the acquisition date and the beginning of the current
period for which the consoJ-idated financial statements are being
prepared.
l- Determine the NCr strare of the changies in subsidiary equity in
the current peri-od.' The calculation could be represented
diagrammatically, as. shown below:
AEAR-a9
Advanced Financial. Aceounting & Reporting page 5

CaTanTating the l[Cf share of equity

v uly 3 Step 2 a+an

JLUP J2
Share of equity Sh re of change l-n Sh re of change in
recorded at equity from ity in current
acqui.sition Cale ac! isiti on date to period
beginning of
urrent period
)<- +

Time Acquisitl Beginning o End of

date: current period current period
Note that, in calculatjng the NCI share of equiLy at the end of the
current period, the information relating to the NCf share from steps 1
and 2 should be avaj-l-able from the precious period's consolidation
worksheet.
i'ntragroup baiances, transactions, income, and expenses should be
e"l-i-mi-nated in ful l-.. lntragroup losses may ind.icate that an lmpairment
loss on *"he rela'Led asset shoulci be recognlzed.
Tihen an acquirer obtains a majority interest, but not l-00? ownership,
::r another enl--iir: r --ne process of recordlng the transaction is
:tr:e1::a-r-,' n3i e cc:cp;-lcateci. The portion of the acquired operation
r.o-; :'...'rea c':, :.j€ acq::re:, but clained (in an eccnomic sense) by
cu:s:-ie i:::e:ests, :-s :e:e:red tc as nolrcontro).ling i-nterest- Not all
s:ai-lia:i se::ers agree:..':rei-:le:, in a s:tuacicn :.n which goodwiJ-1 or
negai:ive goociwill wil-i be reported, to value it with reference only to
the price paid by the new (mejority) owner; or. whether to gross up the
balance sheet for the minority's share as well. IAS 22 had a1lowed
'.c-'r, apprcache s, bu: PEX.S 3 specifies that assetg and liabilities are
walued entireTy aX fair va7ue, and ttr.e noncontrolling intereat i-e
correspondingly adjusted to ref)-ect the re.)-evant proportion of the net
assets.

-nder PFF.S 3 a.i -denti-fiable (r.e-, excluding goodwirl) assets and

Irabiii-uies are recognized at the:-r respective fair.ralues, incJ-uding
those correspondi-ng to the non-controlling's ownership lnterest. This
means that there is a step-up i-n value to equal the val-uation being
p.iaced on the enterprise indirectly by the new majority owner.
Under t.l'is aptproach, tJ|e nonc;ontrolTing interest shouzr in a
<:ansolidated baJence sheet vitl be the nonaontrolting percentage ti-mes
tlre net assets of the sr:Jrsidiarlr as reported in the parent's
consolirlzted baTance sheet. Goodwill will be reported, as under
partial goodwill or full-goodwill method depending on the opti-on use by
the acquiring company-

Non-controTTing interests shou1d be presented in the consoTidaXed

balance slreet vithin equlty, but separate froa the parentfs
sharehoJ.ders'. equity. Noncontrolling interests in the profi-t or l-oss of
the group should also be separately presented.
PAS27 states that j-ncone attributable to noncontrolling j-nterest be
separately presented in the statement of earnings or operatlons.
Generaily, this is accompJ-is'hed by presenting net j-ncome bef ore
noncontrolling interesl, followed by the allocation to the
nonccntrolling, and then followed by net income"
ASAR-09
 ldwrncsd finarrci*l l,ecounting f, Beporting 1>rgn 6
Consof,"idated Finaacial Statsents
(Date and Subsequent to Date of AcquJ-sitt-on)
I : lils Fair V;,Iue qf NCI givq+
Company Z acguires g)8 of Company Y for (1Q-r,gO-O.Oifd. value of
Company Y net assets at time of acguisition be-il! and fair
value of these net-- i-dentifiAhle*gsst*+s trei
Detern:i-na tJle fo1-lo'rring:
l"\ 1- GoodriJ-J. arising orr conso].i.l-Lion is to b€ rraf_ue*l oh ttrr
\- pro;rortiona.tg bagil or *Partia]." Goodri].l-:
a. P1,600.000 c- P3,600r 000
b. P2,0oo, o0o d. P4,500,000
2 - Iifon-controaaingr interegt arising orr corrsolia-tion ig to ba va1uad on
YI thc prcportionate bagia or 'Partial.- Gloodril.l:
a- P1r 200,000 c. P2r 5001 000
b. P 1i 600,000 d. P3,000,000
3. ariuing on oonlo].:':r-tion. ig to ba waf-ued on ttre full
Cioodr,ri1.J- (fair
T waJ.ua) basie or *E'u!-I-lGross-u1>,, Goodtr1-J-1 :
a- P1r 6001 0O0 c- P3r 5OO, OOO
b. p2,aoa,oao d. P4,50O,000
f' 4 - 1rlon-ootatrof--l-irrg irntarast ariaing orr oorraof-idrtioD ia to lre rralrrad. on
ttre fuf-I- (fair rrq.]-rra) bagig or "Err1l-r/Grosc-rrp,' Gqodwj-l]. :
a. p1,200,000 c. P2r 500.000
b.PL,600,000 d, P3,000,000
Conhol Premlum /Conlrol Dlrcounl
A conbol Fremlum is on omount thol o buyer ls usuolly willlng to poy over lhe cunent
mqrket Price of q Publicly trqded compqny. This pr,ernium is utualty iustifted by the
expected synergies, sush qs the expected insreqse in cosh flow resulting frgm cost
sovings ond revenue enhqncements qshievcrble in the merg€lr or consolidqtion- lf ihe
considercrtion tronsferred is proporlionolly more thon the foir vqlue of non*controlling
interests, there is q control premium. ln lhe apposite situqlion, o confio, dlscounf (whlch
often arises in q fire ssie) er disssunt for lsck of control {somelimes cslled o noft.
conkolling interest discount) orises.
If - Wl-ilt r'a.ir Val-rrc of NCf gl-ven and collltro]- I,r-rrrl_urn
Entity Subsidiary has 4Ot of its share publtcfy traded on an exchange.
Entity Parent purchases the 6oB non-pubricly traded shares in one
transactlon, paying P6r3O0r00O- Based on the trading price of the
shares of Entity Subsidiary at Lhe dat-e of gaining control a walue of
P4,00o,000 assigned to the 408 non-sontrolling interest, (or fair value
of non-controlling interest), indieating that Entity subsidiary has
paid a contrar preuiua of P3ootooo- The fair varue of nntity
subsidj.ary's identifiable net assets is p7r0oo.o00 and a carrying value
of P5r 000, OOO , '. t
Deternine the fo].1ouing: _. li'i''i'ii ,'(' ,.:',rl
i- 1. Goodrril-L arising on consolirl4liol igr to be .rralued on the
h
\r
proportionate ba.eie or'.parti{J-,, Goodrril-l.:
a. P1,200,000 c. P3,300,000
b. P2,100,000 d- P4,120,000
V). 2. Nota-cotatrollirrg irntcraat ariaingr otr conco1.id^Li.otr ia to ba rralrrad on
t' I thc proportionatc ltarir or $partial- Goodtr:il-a:
. a. P2,000,000 c. P4, COO,0OO
b- P2,800,000 d- P4,120,000'
3. Goodri3.J. aricing orI 'congolida.tion
L value.) bagig or
irc to be lra.f-rred on the
" coodri].]-I
fref_l_ (f,air

a. Pl,200,000 il c. P3,300,000
b. P2, L00,000 d. P4, 120,000
U 4. Nonrcontrolling interent arising on connoJ.idation ig to be rraheecl on
tlrq fuI.I- (fair wal.ue) bagis or ..FuJ-1,/Gross-up, Goodwi1L:
a- P2,000,000 c- P4,000,000
b. P2,8OO, OOO d. P4,12Or 000
:\ 5- E'air var-rrc Elalir (Frrar--goodrir-1 Alproach) - Assuming the price paid
amounted to P6r2g4,OOO whictr includes control premium of P294,OOO
with no fair value of non-controlling interest given. Goodrrill.
ariaingr on concolidation is to be valued on ttre fuJ.L (fair, valus)
basia or "Fu.11,/Groos-up" Goo&ril-J- :
a. P2.1,00,000 c. P3t294r0OA
b. P3,300,000 d. P4,120,000
erAR-o9
 Advanced Einancial. Accounting 6 Reporting Page 7
6. In reJ.ation to . No. 5, non-controJ.1-ing interest ariaing on
[\ conso1idation amounted to:
a- P2,800,000 c. P4,000,000
b. P3,294,000 d- P4, 120, 000
IfI - Step Acquisition: Wit-h E'V of, NCI & F\I previously held
equity interest in ttre dcguiree/subsidiarT.
Pjlle-s-qompany acquires(J5) p".c"nt of serap Conrpany's conmon stock for
, pSOO,OO0 cash and carr.ies the investment as a financial asset. A few
---mci€Fs l-ater,
l____----
pur,:hases another ffiO) percent of Serap Company's
-9g:_gg. At that date, .Serap Company reports identifiable
stock f.or !ZiI-6A,Q_0_0.
assets w:-tFa"--66oil val-ue of P3,gtll-r,{,ria' and a fa.ir va1u. of *pT,
and it has liabitities with a book vaiue and fair value of -P*J&ilY, SOO) dEO.
T,h-e*-fa\ value ot the($ non-controlling interest in Serap t"mpiny i"
P_2!pr9so.
1. Goodwill arising on consoJ-idation is to be valued on the
Ir proportionate basis or' "Partial" Goodwill:
a - P 84, 000 c. P300, 000
b. P100,000 d. P400,000
2. Non-controlJ.ing interest arieing on coneoJ.idation i-e to be val.ued on.
the proportionate baeie or "Partial." Goodwj.Il:
a. P300, C00 c. P800,000
b" P500,000 d. P900,000
rl
ti
3. Goodwill arising on consoLirlrtion ie to be walued on the full (fair
wal.ue) basis or "Fu11,/Gross-up" Goodrill-:
a. P 84,000 c. P.300,000
b. P100, c00 d" P400,000
4 - Non-controthng interest ar:-sing on consol-idation is to be va1u6d on
the full (fair value) basis or "Ful-l/Gross-up" Goodwill:
c. P800,000
b. ?5cc, i,-'rc d. P900,000
5. The remeasurenent gai-n or losrr to be recogrrized to profit and loss
\t account i-f the 15t ownereh1p ie a EVIPL (fair value through profit
an<l I-osslwhen the additional ehares ara acquired:'
a. Zero c. P40,000 f oss I: r.
c. P.i :,, ' - .: caln d. P68, 000 f oss
I I,'
6- The remeasurement gain or )-oss to be recogrrrized to profit or J.ose
account if the 15t orneretrip is a SEgqL -(fair val-ue througrh otller
compre}.ensirre incoue)when the additionaJ- ehares are acquired:
a. Zero c. P4 0, 000 l-oss
b. P4O, COO ga:-n d. P68,000 loss
IV - Bargain Purchase Coryutation- AttrilcutabJ.e 6ntireJ.y
to _the_fcqrirer (or Parent) .
Parlor Company acquires €*S:SS+ of Saloon Company's common stock for
P225,000 cash- At that derte, the non-controlling interest in Saloon has
a book rzalue of P52,500 and a fair value of 9821000. Also on that date,
Saloon reports identifiabl-e assets with a book va.l-ue of P400,000 and a
fair value of P510',000, and it has l-iabilities with a book va.l-ue and
fair value of P190,000.
i\ 1. Gain on bargrain purchase arisingr on consol.idation if fair wal.ue of
\_, net identifiable assets is to be valued on the proportionate basis:
a. Zero c', P15, 000
b. P13,000 d. P17,333
2. Gain on bargain purchase arisingr on consolidation if fair value of
net identifiab].e asgets is to be waLued on the ful]. (fair walue)
h basis.
a. Zero c. P15,000
b. P13, CCO d. P17,333
Sale of Subsidiary - Loss of Control of a Subeidiat1r or
\\Deconso].iciationu
Control of a subsidiary may be lost as the reau1t of a parent's
decision to se1.I i-tg control-l.i"ng interest in tlre subaidiary to another
party or a.s resuJ-t of a subsidiar'yr isauing ito ghares to otlrers.
Control rnay be lost, with or without a change in absolutC or relative
ownership J.evels, as a result of a contractual arrangenent or 'i-f the
subsirl'i arl' becomes sub3ect to ttre control of gowernmentT court,
administrator, or regml.ator (e.9. througtr legaJ. reorgatri.zation or
bankruptcy) .
AEAR-09
 lAdrranced Finamciral. llccorrating 6 Raporting
palF g
conciatent rith t}.e approach take. for stqp acgrri.sitions .(ref,er
Prob-Ler III), rrhan controL of a gubgiclia-X. is- Iost, and a.a iateregt to
retairred, t}.a.t intercst ia Deasured at fair waJ-ue, and i.g
into ttre -alc,laticrr thi-o i" ;.;;;;
of ttre gain or rogg ora <riepoaar. rt shourd
aoted that this cl.ange aPPliea algo to gituations be
logeg joi'nt eontrol of, or aigmificant infrrrenca orrar,in which an e*tit'
anrottrer entaty.
V - Deconsol.idation
Pedro Company 'owns BO, OOO shares of Santa Corporation,
outstanding comlnon shares, acquired at book walue.- s 100, OOO
2aa8' consolidated barance sheet presented by pedro and santa The December 31,
net assets of Santa in the amount of p6oo;ooo- on January included
Pedro sells 7o.ooo shares of santa for p49oro0o- The.fair L1 ra;;:
Pedro's remaining 10t interest in santa is rz0,,ooo- what amount value of
or ]-oss, if an/r should be recognized on the sale of pedro,s of gain
resulting in deconsolidation, and how much of that should be shares
to Pedro? Determine the gain or ross on di_sposal,(or deconsoli-dation) attributed
should be:
a. P4O,0OO Loss b. P8O,OOO ]-oss c- plo,OOO gain d- p8O,OO0 gaj-n
VI - 8al-e of Shrbsinlarlr: ffbt Resrrf.ting an lo!.s of, Con1tsrol,
tfo
Ad**itiona1 Slrares Xssued.
Padyak company owns 80.000 shares of sirkur-o corporation, s
outstanding comlnon shares, acquired at book value- The 100r 000
December 31,
ZQAB, consol-idated balance sheet presented by padyak
included net assets of sir.kulo in the amount of p600,odo. onand Slrkulo
2AO9, Padyak sells January 1,
LO, OOO shares ( 10S ) of its Sj_rku.l-o stock to
unrelated parties for p7o,o00- Determi_ne the gain or r";;;.
of shares to be recogni-zed in the profit or lo=i disposal
a. Zero b. p10r000 gain c. p10,000 loss =a"a"*"*, p5,000
d. loss
I7II - SaLe of, Srrbsid{arlf: Not Resulting Ln Loss of Control
,
Additional. Strares Xesued.
Padyak company owns g0r0o0 shares of sirkuro corporation,s
outstandingr common. strares, accruired at book va1ue. ?he roor000
2008, consolidated balance sheet presented by padyak Decernber 31,
included net assets of sirkufo in the amount of p6oorooo. and sirkul0
2oQ9, sirkulo on January 1,
issues 25,000 additional shares of common stock to
unrelated parti es for P1?5, ooo. ?he amount to
"additlonal paid-in capital,/share premium,, account: be credited to
a. Zero b. p16rOO0 c. p 55,000 d. p10{,000
\rflf - Iltro1ly_owned
The financiar statemerrts fop Goodwin, rnc- and. corr company
year ended December 31, ?a14t prior to Goodwin.s busj_ness for the
transaction regarding Corr, foll-ow (in thousands): combination

Goodwin Corr
Revenues
Expenses
P.2,7AO P 600
1, 980 400
Net Income P 72Q P 200
Retained earnings, l/L P 2,400 P 400
Net income 720 200
r_aenqs 27 0\ ( 0)
rleEarnect earn.l-ngs, lZ/31 P 2, 950 P 600
Goodwin Corr
Cash P 240
Receivables and inventory
P 220
L,2OA 340
Buildj-ngs (net) 2,7 OO 600
Equj-pment (ne!) 2, LOA L,200
Total assets P 6,240 P 2.360
Liabilities P 1,500 P 820
Common stock 1, 080 400
Actcu-E.ronat pal_cl-in capital 810 540
necr earnLngs 2,850 600
Total lj.abi]-ities and
stockhol-ders, .eguity ? 6.240 P 2,360

AEB-O9
 Advanced Financial, .Accounting e negg<i.ng Page 9
;\.December 31, 2aL4, Goodwin issued€atD :-n aeut and @shares of its
lptp par value cornmon stock to the bwners of Corr to purchase all of the
tdtstandinq shar.es of that companv. Goodwin shares had a fair value of
-^ />--
€,pt per share. Goodwirr p.aid QzP to a broker for arranging the
transaction. Goodwrn.-paid 1$jP in E-tock issuance costs. Corr's egliqent
\.ias actuaLly r^rorth {f ,A'q}LSut r-ts bui.Idi.ngs \.{e.re onl.y val.uecl at t55g)
1. If the combinatm- is accounted for as an aequj-E-l[Jpn, at what
h amount is the investment fecorded-c.--pi,on Goodwin's bookS?
A. p1,540 -,-...-.: ais-':--SU t''' .?7-ruf1 'rslr^rhql\t- t
B. P1,800 -z\';t ty..*.rzfu D. P1,860
2. Compute the consoli-dated reysnggr for 2014:
v A. P3,300 C. P1,540
B. PZ,'/AO D. P "720
3. Assuming the combination is accounted. for as an asqlailitj-on, compute
fi the consolidated exp-ercses for 2Ql4'-
A. P1,980 C. P2.015

I B. P2,005
A. P 460
B. P435
D. P2,A40
4. Compute the consolidated cash account at December 31'
C. P425
D. P400
',(ild -'ts - )st)
t, tr
J. Compute rhe consolidated buildlngs (net) account at December 31,2014
A D? ?NO c. P3,260
B. P3,3?0 D- P3,300
6. Compute the consolidated equipment (net) account at December 31,
D
A. P2,]-oa c. P3,300 {'l:fil';1rW\
'
R D2 ?NN D. P3,500 A-- [1:[!'i.h tf ,r r,: '-ll i
Assur,rlng the combination is accounted for as an acquisition, compute
!: the consclidated goodwilJ" account at December 31,20]-4.
A.P c C-P125
B. Pi00 D. P160
A 8. Compute the consolidated common stock account at December 31, 2074:
lJ A. Pi, oeo c. P1,480
B. P1,380 D. P2,280
9. Com.pute the consol-idated additional paid-in capi-tal at December 31,
f- 2-l1L
\-' 'wia' ,f r ' ,i 1/
A- P 810 C-P1,575 '
B. P1,35C D- P1,910
1-0. Assuming the combination is accounted for as an acquisition;
b compute the consolidated retained earnings at December 31_, 20L4:
A. P2,800 c. P2,8s0 (rg? - ?i )_
a. ";&.fIi$
* "-
;::i:",*
r--.-
*..;r;23 ",'*i*,I=t rgx#::t,ii d,ky" cl)
aHa-o#;Ii6EI6fAgrproach versus No push-dorn accounting
(Stock Acquisition Approactr)
Prince Company aiquires Duchess, fnc. on January !, 2011 - The
consideratlon transferred exceeds the fair value bf Duchess' net
assets. On that date, Prince has a building with a book value of
P1,200,000 and a fair value of P1,500,000- Duchess has a building with
a book value of P400,000 and fair value of P500,000.
1- If push-d.own accounting is used. what amounts in the Bui-Iding
account appear on Duchess' separate balance sheet and on the
consolidated balance sheet immedj-ately after acquisition?
A. P400,000 and P1,600,000 C. P400,000 and P1.700,000
B. P500,000 and P1,700,000 D. P500,000 and P2r,000,000
L, If push-down accountinE is not used, what amounts in the Building
account appear on Duchess' separate balance sheet and on the
conso.l-idated ba.l-ance sheet immediately after acquisit ion?
A. P4A0,000 and P1, 600', 000 C. P400,000 and Pl-,700, OOO
B. P500,000 and P1,700,000 D- P500,000 and P2,000,000
X : Far;$ia11y-orrred
Power Corporation acquired pOf percent of SiIk Corporatlon's common
stock on December 31, 2Ol4 . Valance sheet data for the two companies
imm.ediately following acgulsition follow:
AEAR-o9
 ?aqc lo
fteu Porer silk
P 44,000 P 30, o00
s recer-val}-Le 110,000 45,000
Invqnt,or'y 130,000 70,000
Land 80,000 25,000
Buildings q]4 eguipment 500,000 {00,000
I,ess: Accumulated. depreciation (223,00a) (165,000)
rrrvtrsrmenc an $ljK Corporatj-on stock 150,500
ASSetS P 79L.500 p 405- 000
fluuuurlLsj P 61;500
Payal3l-e
reAss Pdya.f)
P 28,000
95. OOO 37,000
Bonds payable 280,000 200r 000
Common stoek 1_50,000 50,000
Retained garnings 205,000 90,000
Total Liabi-}ities and Stockho].ders, Cauit; P ?91,500 P 405,000
After the date of, the busi_ness -
tiah.iliries approximated thej.r faj-r value excepr for
?::^-"-"j..::" whi-ch
inventory, ii:, had a fair walue of pg5,
ooo, and rand, which had a
fair value of P45'000. The fair value of the non-contro1li.ng interest
was P64r5O0 on December 31, 20L4- For each of the questi;n.be]ow,
indj-cate the appropriat. &c!gf that should appear in the consolidated
bal'ance sheet immediately after the business - tombinatlon on the basis
of ful1-goodwill approach:
r'". 1. What amount of inventory wi}l.be reported?
A. pl-79,000 C. p210,500
B. P200,000 D. P215,000
'. 2. What amount'of goodwill wi-ll- be reported?
3: irr,Soo - Lhr,{:p., .r,r,. E: Il!;333 -fi'riL i'L"r

3. What amount of total assets wilJ. be reported?

A. P1,091,000 c. P1,196,500
r B. P7,1,21 ,AAA D. P1,231,500
;" 4. What amount of Investment in Silk will be reported?
A.P
r\, B. p14o,ooo
O

iliS;333 i:
\ 5. lllat total of liabilities wj_I1 be reported?
A. P265,000 c. P622,OOO
B. P436r500 D. P701,500
: 6- what amount will be reported as non-controlling interest?
A, P4Z,OOO c- P60,g00
p52,500 D . p64,500 I t{Lt
_ l.
7' -1i,rri'.-:),1
of parent's
l/'/ lhat.amotrnt share or controlring j.nterest in retained
earnl-ngs be reported?
A. P2g5,0OA c. P232,000
B. P26g,O0o D. P205,000
I)
ti
8. what amount of consolidated retained earnings will be reported?
A- P295,000 c. P232,O1a ,' ti
B. P268,OOO D- P205,000 l
II 9. What amount of stockholders,
A. P355. O0o c. P419,500
equity wil_I be reported?
. cJc,.l,i I

B. P397,000 D. P495,000 AflAR-Op R[ ], I

xr
Par company owns 60g of sub corp.,s outstandi-ng capit,a] stock.
1,2015, Par advanced sub p70,000 in cash, which was stilr outstandingon May
A at Decdmber 31, 201-5- what portion of this advance shoul-d be eliminated
in the preparation of the December 31-, 2015 consolidated bal"ance sheet?
. A. p70,000 B. ?4T,OOO c- p28,oo D, Zero
XII
Dean, fnc. owns lOOt of Roy Corporation, a consolidated subsidiary,
80t of wal1,.rnc., an urtconsolidated subsidj-ary and
(1 at Dece*u", sr. on the
same date, Dean has receivables of p2oo, o0o rrlm nof plzs, ooo from
wall' rn its December 3L consoLidated baLance sheet, Dean
"rrJ shouLd report
accounts receivable from i-nvestees at:
A.p B. P35,000 P175,000
fun tjaai rtta*? a. l*at* dqrrqr*a, bb>
*ta7 lretro.taqrr^arltpa,re*of
*N o**a6.
*na,.ovbt*-$wtt6"pffi lwh.aaoSy6aA"1ll*.
*
- gtu$ ur@rt e.y?r- r.lriuvoL niA*ui da&rrni,raottta,71r. * *
**oow'tbezd,0oooura6ea+-e+er|otewrwgocwrletvrwrt,
***It*Pot{rbilifretv*nialwwlww*.na,wa,nd,,t1@qOD *te,&wrvtsh,?w,gr*t*
&{ror*wwtorttrfurita***
advariced Fi-nanci:] Accounting & Reportingr page 11
XIII
Cobb Company's currenL recei-vables from affiliated companies at
Decem-ber 31, 2015 are: (1) a P75,000 cash adwance to Hill Corporation
(Cobb owns 30t of the voting. stock of Hifl and accounts for the
investment by the equity method) , (2) a reeeivable of P260,000 from
Vick Corporation for adm.inistratj-ve and selling servi-ces (Vick is 1008
owned by Cobb and incl-udeci j-n Cobb's consolidated financial
statemelts), and (3) a receivable of P20C,000 from Ward Corporation for
merchandj-se sales on credj-t (Ward is 90?-owqed unconsol j-dated
suhsidiary of Cobb accor.rnted for the equity metho{) . In the current
assets section of its December 31,2015 consolidafed balance sheet,
Cobb should report accounts receivable from investee{ in the amount of:
A. P180,000 c. P275,000 I

B.P2s5.ooo D.Ps3s,ooo !hr^l7:{.

ReverseAcquisilion(Tokeovers) -" !l 1''' 'l .ii:
',.'
A reyerse ocquisilion occurs when on enterprise obtoins ownership of ihe shores of onolher
enterprise but, os port of ihe tronsociion, issues enough voting shores qs considerotion thot control
of the combined enterprise posses to the shoreholders of the ocquired enterprise. Although,
legolly, the enterprise thot issues the shores is regorded os lhe poreni or conlinuing enterprise. the
enlerprise whose former shoreholders now conirol the combined enlerprise is treoied os the
ocquirer.for reporting purposes. As o resull, the issuing enierprise (the legal porenl) is deemed io
be fhe acquiree ond lfie compolny being ocquired ln appeorance (lhe legot subsldfoty) is deemed
lo haye acquired conhol of ffie qssefs ond business of ,'re issghg enlre4rrise, (the legol poreni is
effectively the ocquiree while the legol subsidiory.is effeclively the ocquirer. olthough the legol
porent i\ ihe entity thot issues sh<rres to ocquire o legol subsidiory, q leverse ocquisition is often
initioted by the legolsubsidiory)
While not o common eveni, ihis form of business combinotion is often used by qctive non--public
componies os o meons io obtoin o stock exchonge iisting without hoving io go through ihe listing
procedures estoblished by ihe exchonge. A tqkeover of o public compony thol hos o stock
exchonge listing is ononged in such q woy thot ihe public compony emerges os the legol porent,
but the former shoreholders of the non-public compony hove control of ihe public compqny-
Are lhere Non-conkolling lnteresls inq Reverse Acqubilion?

Non-conholling interest is zero, if oll of legal subsidiary's (lhe acqvirer) siockholders occept the
offer lo exchorrge their shores in ihe legrrl pareni (lhe acqviree). lf not oll of legol subsidiory's (lhe
acquirer) siockholder:s ogree to the qxchonge of shores, the legol subsidbryt (fhe ocguirer will
h o ve non -c o ntrolli ng profls b ut noi consolidoied nef incorne.

Struclure Enlilies or Vqrioble lnteresl Entities (VlEs)

A second lype of conkolled enfierprbe is q sfrucfured entity. qlso known ss vsriqble inieresf enfily
or o special purpote enlily. PfRS ,0 provides guidonce on when o slrucfured enfdy (SEJ should be
consolidofed. An 5E is sel up the repoiling enfierprise (or 'sponsor") lo pertorm a yety specffic ond
nofiott( funcfion.
SE is nat conlrclled through vofing poweL
The difference, belveen a subsidiary and an SE is thof on
lndeed, on SEmay nol even be o corporolion bul could insleod be o podnenhip. An SE qlso con
be creoted simply by delegoiing specific powers to certoin individuols to oct on beholf of the
"sponsoring" corporotion - in effect, by creoting sort of "ogency" relotionship with individuols
insteod of corporote entities-
xrv
Mask. a private limited company, has arranged for Man, a public l-imi-ted
company, to acquire it as a means of obtaining a stock exchange
Iis1,ing. Man issues 15 miflion shares to acquire the whole of the share
capital of Mask (6 milIion shares). The fair va.l-ue of tire net assets of
Mask and Man are P30 million and P18 million respecLively. The fair
value of each of the shares of Mask is P6 and the quoted market price
of. Man's shares is P2. The share capital of Man is 25 milli-on shares
after Lhe acquisition. Cal-culate the vaLue of goodwill in the above
acquisition.
A. P16 mill-i-on C. P10 mil]'ion ASAR-09
B. P12 millron D. P 6 mil-1ion
tOpporfunffies ore usuorrydisguised os hordwork so mosl peopre don't rccognize
lhem*
*Success consisls of o litfle daily
etroil'
*ln every friol, fhere's d lreosure waitlng lo be uneorfhed'
***Ask nol lil o lorger gorden, bul for o ftner seeds*'
t|*Ask nol lor q lighter burden. but for q brooder shoulder**
 Adrranced Fanamci a'l Accounting e Reporting page 12
I(V - Subcegueat to Date of Acquisiti_on:
Cost Mode]'r/lbthod v€rsus Squity ltethod,
Pedro purchased 1008 of the comnon stock of the sanburn company on
,ranuary lt 20x4, for P500?000. on that date, the stockholders'equity
of- sanburn company r'ras P3Bor000. on the purchase date, inventory of
Sanburn Company, which was soJ.d during 2Ox4, was understated byl
P20r000. Any remaining excess of cost ower book'walue is attributable
to patent wj-th a 20-year 1ife. The reported income and diwidends paid
by Sanburn any were as follows:
20x5
Net income P80,000, ps0, 000
Dividends 10,000
1, Using the cost method, which of the following amounts are correct?
Investment fncome Investment Account Balance
i a.
b.
2Ox4
P10,
P70,000
P70,000
OO0
December 31, 2Ox4
P500,
P570,000
OOO

P550, 000
d. P10,000 P550, 000
2. using the sg;i method, which of the following amounts are correct?
Investment Income Investment Account Balance
h 20x5 December 31, 20x5
a. P10,OO0 ffi
b. P70,000 P5?0.000
c. P70,000 p550,000
d. P10,000 P550,000

{q- 3. Using sophisticated (fu1l) g{uitv method, which of the following

\)' amounts are correct?
Investment fncome Investment. Aceounb Balance
2Ax4 December 31, 20x4
a. Pst ooo P555,000
b. P55,000 P545,000
c. Feryoeo thti P565, 000
d. P80,000 P570,000
/t 4. Using sophisticated (fu1l1 :gts4y method, which of the f ollowing
amounts are correct?
fnvestment Income Investment Account Balance
20x5 lscembef_31L?q$
a. P55,000 ,P545,000
b. P55,000 P555,000
c. . -e€Fe 65lt P620,}aa
d. P90,000 P570,000
X\ff - C,!II under Entity Concept (PFRS 1Ol
For 2Qx6, Pyna reported p500,000 of net i-ncome from its own separate
operations. This amount exc-Lqdes income relating to syna, its 808*owired
creaxed subsidi-ary, whi-ch reported p1o0r0o0 of net i-ncome and declared
P55'00o of dividends in 20x6. what is the consol_idated net income under
Lhe econoriric unit/entity concept?
A. P536r 000 D. P600,000
B. P544,000 E. P644,000
c. P580,000

XYII - Cl{I u:rder pa.rent Cotq}a.ny Conce5>t

Eor 2Ox6, Pyna reported p500r 0OO of net income from its own separaLe
operations. This amount excludes income relating to Syna, its 808-owned
dreated subsidiary, which repor.ted p1OO,000 of net income and declared
P55r000 of dividends in 2ax6. what is the consori-dated net income under
the parent conpany concept?
A. P536,000 D. P600,000
B. P544.000 E. P644tAAO
c. P580,000

rhe greofesf use of lffe is fo spend l| for somelhlng lhot wltt out1prst fr.

.Fr
 Advaneed Financiar Accqrnting e Reportirrg page 13
X\,lIII
Parrett corp. bought one hundred percent of Jones rnc. on January !,
2cx4, at a price in excess of the subsid.iary,s fair value. on that
date. Parrettrs equipment (ten-year life) had a book val-ue of p360r000
? but a faj-r value of P480,000. Jones had equipment {ten-year life) with
a Lrook value of P24o,000 and a fair value of p350,000. parr'ett used the
cost model to record j-ts investment in Jones. on December 31, Zax6,
Parrett had equipment wiEh a book value of P250,000 and a fair value of
P400,000. Jones had equipment with a book varue of p170,000 and a fair
val-ue of P320,000. What is the consolidated balance for the equipment'
account as of December 3.1, 20x6?
A. P710,000 B. P580,000 c. P475,000 D. P497,000
xrx
on January 1,20x4, BB, rnc-, reports net assets of p?60,000 arthough
equipment (with a 4- year life) havi-ng a book value of p440,000 is
worth P500,000 and an unreco.rded patent is valued at p45,000. HH
corporation pays P692,000 on that date for art 80 percent ownership in
BB. rf the patent is to be wrj-tten off over a 10-year period, at what
amount should "it- be reported on consolidated statements at December 31,
20x5?
A. P2B,800 B. P32,4OO c. P36,000 D. P40,500
)o<
January L,2aL4, Payne corp. purchased rOt of shayne corp.'s p10 par
crommon stock for P900,00O. On this date, the carrying amount of
shayne's net assets w.ls P1,000,000. The fair values of shayne's
identj-fiable assets and 1i-abitj-ties were the sary6:--*s-1!hej-r carrying
amounts except for plant assets (net), whi-ch wereQZQe.qUin excess. of
che carrying amounL. Eor the year ended December 3f, 2o-T4, shayne haci
ne1- income of P150,000 and pald cash dividends totalring p90,000.
Excess attrlbutabfe to plant assets i-s amorLized over 10 years. fn the
ti-=cember 31, 2074, consolidated balance sheet, non-controlling int.erest
shculd be tepcried ar:
A. P282 ,1 I1 B. P:00,500 c. P397,714 D. P345,500
Pnotoplasm corporation acquired fiJ p"r"u.,a of spectrum company on
January i, 20x5 ror P420,000. At that date spectrum had inventory and
plant assets with market values greater than book va.lues in the amount
of P50,000 and P90,000 respectively. The inventory and plant assets
were assigned a remaining l-ife of six months and five years
respectively. Assuming that Spectrum ,has 20x5 j.ncome and dj-vj-dends of
P160,000 and P60,000, respectively and 2ax6 income and dividends of
P210,000 and P80,000, respectively, what is the ba.l_ance in the non-
controlling interest account at December 31, 2Ox6Z
A. P169,200 B. P276,000 c. P136, 900 D. P223,2AA
xxrI
on April L, 2QL4, PP, rnc., erchanges p430,000 fair-val-ue consideration
for'lo percent of Lhe outstanding stock of RR corporati_on. The
remainlng 30 percent of the outstanding shares Continued to trade at a
collective fair val-ue of p165, 000. RR, s identifiabre asseLs and
lrabilities each had book val-ues. that. egualJ-ed their fair values
Aprlr l, 2014 for a net total- of p500,000. RR generates revenues , on of
P600,000 and expenses of p360,000 and paid no dividends. on a December
31, 2014, consolidated balance sheet., what amount shorrld be reported as
non-conlrolling interest?
A. .P219,000 B. P23'7 , 00A c. P234,000 D. P250,500
)O(III
or-r January ). | 2014, Pp company acqui-red an B0 percent investment in ss
company. The acquisition cost was egual to pp,s'eguity in ss,s net
assets at that date. on January 1-,20L4, pp and ss had retained
earni-ngs of P500,000 and Pl00,000, respectively. During 2014, pp had
net income of P200,000, rvhich included its equity in ss,s earning.s, and
declared dlvldends of p50,000; SS had net income of p40,000 and
declared dividends of p20,000. ?here were no other intercompany
t-ransactions between the parent and subsidiary. on December 31, Zol4,
what should the consol-i-dated retained earnings be?
A. P650,000 c. P766,000
B. P666,000 D. P770,000 .aIEUTR -0 9
Never take direction from c, crowd for your persono, ,ife. And neyer choose lo qvit
jusf becouse somebdy else disogrees vilh you.
 Advanced Financial Accounting E Retorting sol-utions - page
I Solulion to Pioblem
1 .
I

Proportionote Bosis (Portiol-goodwill Approoch)

1

r Portiol-goodwill
Foir volue of subsidiory (80%):
Considerotiontronsferred: Cosh.. ...........P10,000,000 (80%)
Less: Book volue of stockholders' equity {net ossets)
- S Compony: P6,000.000 x B0%.... ......... 4,800.000 (80%)
Allocoted excess...... ....P 5,200,000 {80%)
Less: Over/undervoluolion of osseis ond liobilities:
{P8,000,000 - P6,000,000) x B0%..... .......... 1.600,000 (80%)
Pcrsitive excess: Goodwill (portioli .....:......... 1507;)
*
cr- s,600,000 (80%) NCr- 0 {20%)
3. Foir Volue Bosis (Full-goodwill Approoch)
. Full-goodwill
Foir volue of subsidiory (100%):
Considerotion lronsferred: Cosh (P I 0,000,000 I 80%)..P 12,500,000 llOA%)
Less: Book volue of stockholders' equity {net ossets)
- S Compony: P6,000,000 x 100%.. ......... 6,000,000 (100%)
Allocoted excess...... ... P 5.500,000 (.l00%)
Less: Over/Undervoluotion of ossets ond liobilities:
' (P8.000,000 P6,000.000) x 100%...
Ir6,UUU,UUU - ro,UUU.UUU, I vv-/o...,-....... .......... 2.000.mO (100%)
Positive excess: Goodwill {full).......... (ro0%)

cr- 3,600,000 (80%) NCr- 900,000 (20%)

Non-controlling interest
Book Volue of stockholders' equity of subsidiory.............P 6,000,000
Adjustrhents to reflecl foir volue (over/ undervoluotion
of osseis ond liobilities): (P8.000.000- P6,000.000).... 2.000.0m
Foir volue of stockholders' equiiy of subsidiory............... P 8,000,000
Multipliedby:Non-controllinginterestpercenioge............ 20%
FV -Non-conirolling inlerest (portiol)..... Pl,500,000 (2)
Add: i{ori-controlling interesf on full -goodwifl
(P4,500,000 - P3,600,000 portiol-goodwill) or
{P4,500,000 x2O%)*...... .... 900.000
FV - Non controlling interest (full).......... P2100-000 (4)
* opplicobte only when lhe fak volue of the non-controlling interest of subsidio4y ii nof given.
Solulion to Problein ll
1. Proportionote Bosis (Portiol-goodwill Approoch)
" Portiol-goodwill
Foir volue of subsidiory 1607.l:
Considerotion tronsferred: Cosh.. P 5,300,000 (60%)
Less: Book volue of stockholders' equity {net ossetsi
- S Compqny: P5,000,000 x 60%.... ......... 3,000.000 (60%)
Allocoled Excess....... ........P 3,300.000 {60%)
Less: over/undervoluotion of ;;l' i.Biiiii"r'
{P7,000,0o0 - Ps,000,00o1"s"tr
6o%.....
x ....".... 1.200.000 {60%}
Positiveexcess: Goodwill (portiol)..... .............f21!O0O0 (60%)

cr- 2,100,000 {60%} NCr- 0 (40%)

3. Foir Volue Bosis {Full-goodwill Approoch)
. Full-goodwill
Foir volue of subsidiory (100%):
Considerotion tronsfered: Cosh .............P 6,300,000 | 60%l
Foir volue of NCI (gyiven)...... ...!r...;.....!r. 4.000.000 { 4A%)
Foir volue of subsidiory .P10,300,000 (100%)
Less: Book volue of itockholders' equity (net ossets)
- S Compony: P5,000,000 x 100%............ . ............. S,OOO,OOO (l0O%i
Allocoied Excess...... "...P 5.300,000 (100%)
Less: Over/undervoluotion of ossets ond liobilities:
(P2,000,000 - 100%.....
Ps,000,000) x ....... 2.Q00.q00 (100%)
Positive excess: Goodwill (full)...... .PJ,30OO0O(100%)
*:
cr- 2,100,000 (60%) NCr - r,200,000{40%)

AEAR-O9a
Advanced Fi.nancial Accorrnting & Reportingr sol.utions - page 2

Non-controlling inlerest
Book volue of stockholders' equity of subsidiory........-....p 5,000.000
Adjuslments to reflect foir volue (over/ undervoluotion
of ossets ond liobilities): (P7,OO0.0OO - p5.0O0,00O)..... 2.00O.O00
Foir volue of siockholders' equiiy of subsidiary...............p Z,OOO,OOO
Multipliedby:Non-controllingtnterestpercentoge..........,4ATo
FV - Non-controlling inlerest {portiol}..... ........p 2,800,O0O (2}
Add:
' Non-controlling interest on full -goodwill
{P3.300,000 - P2,100,000 portiol-goodwill).............. 1,200.000
FV - Non-conirolling lnterest (full).......... ..........8jt000j]00 (4)

5. Foir Volue Bosis {Full:goodwillApprooch)

Fsir volue of subsidiory ll00%l:
Consideroliontronsfened (P6,2?4,C00-P2?4,OC0l'/ffio p 10,00O,0OO { IOO%}
Add: Controlpremium. 294.W
Foirvolue of subsidiory p 10,294,000 (l0O%)
Less: Book volue of slockholders' equity {net ossets) -
Sun Compony: P5,0OO,0OO x 100% 5.00o.00o {t0o%)
Allocoted Excess P s,294,WO Uffi%)
Allocoted Excess P s,294,000 (l0o%)
Less: Over/undervoluotion of ossets ond liobilities:
{P7,00O,0O0 - P5,00O,00O} x l0O% 2.00o.00o (r0o%)
: Goodwill I

Solr.rflon lo Problem lll

l. Proportionote Bosis {Porfiol-goodwill Approoch}
. Portiol-goodwill
Foir volue of subsidiory {757o)'.
Considerotion tronsfened: Cosh..... ........P 2,160,W (60%)
Foir volue of previously held'equity interest
in ocquiree P2,l60,00016a7o= P3,600,00O x I5%..... 540,0O0 {15%)
Foir vqlue of Subsidiory ............. .. P 2,7AO,W 175%l
Less: Book volue of stockholders' equity (net ossets)
- Serop Compony: (P3,900,0O0 - P'l,90O,OOO) x 75%. t,50O.OO0 (75%)
Allocoted Excess...,............ ...........P l,2OO,OOO (75%)
Less: Over/undervoluotion of ossets ond liobilities:
t(P5, r 0o,0oo - P .900,000) -
1

(P3,900,00o - Pl,90o,oooll x75%.., ....... 900.000 {75%)

Positive excess: Goodwill (portiol)..... ............-L_3001P0 (75%)

cr- 300,000 (7s%) NCr- O (2s%)

2. Foir Volue Bosis {Full-goodwillApprooch)
. Full-goodwill
Foir volue of subsidiqry {l0O%):

Foir volue of previously held equity interest

in ocquiree P2,160,000/6Wo= P3.600,00O x15%...-. 540,000 (15%)
{given)......
Foirvolue of NCt 900.q00 (25%)
Foir volue of subsidiory............. ....P 3,600,000 (100%)
Less: Book volue of stockholders' equity (net ossels)
- Serop Compony: P2,000,000 x 1 ffi7"*................... 2.000.000 (I 00%)
Allocoted Excess....... ..P 1,600,m (1OA%l
Less: Over/undervoluqtion of osseis ond liobilities:
(P3,200,000-P2,000,00o)xl0o%..... ...... 1.200.000{10o%}
Positive excess: Goodwill (full).......... (r00%)

cr-.300,000 (7s7ol NCI - r00,000 (25%)

AFen-09b
/ Advanced Financial. Aceounting A Reporting sol.utions - page 3
i
Non-controlling inierest
Book volue of stockholders' equity of subsidiory..............P 2,000,000
Adjusiments to reflect foir volue (over/ undervoluotion
of ossets ond liobilities): (P3,200,000 - P2,000,000).... 1.200.000
Foir volue of stockholders' equity of subsidiory................P. 3,200,000
Multipliedby:Non-controllinglnterestpercenloge............ 25%
Non-conirolling interest {portiol).....
FV - P 800,000 (2)
Add: Non-controlling inlerest on full -goodwill
{P400,000 - P300,000 portiol. goodwill)................ :...,l 00,00Q
FV-Non-controllinglnterest(full).......... ......:...P--9Q0O@(a)
No.5-(b);No.6-(o):
An equity interest previously held ond quolified os o finonciql ossel under PFRS I rb being
rerneosured fo ifs-ocguisilion-dofe falr value ond any ddference is recognlze ln profrl or
loss if TFWPL or OCI if lhe flnancio! osseh is o *fWOCl. The goin or loss is computed os
follows:
Foir volue on previously held equity interesl in ocquiree
P2.160.000 / 6A%= P3.600,000x 15%........... P 540,000
Less: Corrying / book volue ot the poinl controlis
ochieved (cost model)................. s00.000
"Goin on remeosuremenl to foir volue {deemed sole) P 40.000

Solulion lo Problem lY
Proportionoie Bosis (Portiol Goodwill Approoch)
. Portiol-ooodwill
Foir volue otsubsidiory {75%):
Considerotion tronsfened: Cosh P 225,000 l757ol
Less: Book volue of stockholders' equity
(net ossets) - Soloon Compony:
iP400,0o0 - P190,000) x75% . 1s7.500 75%)
Allocoted excess P 67,ffi (75%)
Less: Over/undervoluolion of ossels ond liobililies:
[(Psl0,000- P]90,000)- {P400,000- Pl90,000) x 75% 82.q00 V5%)
,Negotive-excess: Borgqin trurchogegqlp (lqsontrolliog
inieresl or otlribuloble to porent onlyl .
Foir Volue Bosis (Full-goodwill Approoch)
. Full-qoodwill
Foir volue of subsidiory (100%):
Considerolion tronsferred: Cosh P 22s,W 175%l
Foir volue of non-controlling interest (given)* 82.000 l2s%l
Foir volue of subsidiory P 307,000 (r00%)
Less: Book volue of stockholders' equily
{net ossets) - Soloon Compony:
(P400.000 - PI 90,000) x tfi% 210,000 {100%)
Allocoled excess P e7.000 (100%)
Less: Over/undervoluotion of ossels ond liobilities:
[{Ps I 0,000 - Pl 90,000) - ( P400.000 - PI 90,000} x I 00% r r0.000 {r00%)
Negotive excess: Borgoin purchose goin (to controlling
inlerest or oltributoble to taa%
*Ihis ornounf shou/d not be lower cornpored to foir value of NC/ of Stockholders' eguity of subsidiory
[i.e.,(P510,000-P190,000 = P320,000) x2596= PB0,A00). Ofherwise, lhe higherornounf should be used.

Solulion lo Problem V -
Coshproceeds.... P 490,000 70%
Foir volueof retoined non-controlling inieresl equily inveslmenl. . .. . . . .. 70.@0 to%
Corrying volue of the non-contro//rng interesf belore deconsolidotion
(15% or prior ouiside non-controlling inieresl in Subsidiory)
1P600,000 x 2o% l2O,W/ 1 00,0001 I. i20.000 2A%
Foir volue of 100% of Porent. P 680,000 r00%
Less: Corrying volue of Subsidiory's net qssels . 600.000 1047"
Goin on deemed sole of Porenl (disposol or deconsolidolion). P-mP00 too%

Solulion lo Problem Vl - (A)

Coshproceeds.... .-!.... P 70,000
Less: Corrying volue of non-controlling inlerest (P600,000* x 1W"l . . . . . . 60.000
"Goin" - tronsfer wilhin equiiy in "Additionol poid-in copitol" occount P 10.000
*the P600,A00 is alreody ihe gross-up amount since it is lhe omoun presenfed in ,he
'
consoirdoled bo,once sheei.
Adrranced Fiaancia1 Accorrnting & Reoorting ss1rrtiona - pagre 4
Solullon to Problem Vll - (B)
Cosh proceeds from issuonce of oddiiionol shqres ..... P I75,O0O
Less: Corrying Volue of non-gontrolling from issuqnce of odditionolshores:
Non-controlling interest prior fo issuonce of edditionolshores:
Book vqlue of SHE before issuonce... P60O,000
x: Non-controlling inlerest..... .. 2O%* PI20,000
Non-controlling interest ofter issuonce of
odditionol shores:
Book vqlue of SHE before issuonce.......... P60O,OOO
'175.000
Addiiionql issuonce...
BV of SHE ofter issuonce............ ?775,@O
x: NonJcontrolling interest..... 3** 279,000 l5?.0OO
"Goin" - trsnsfer within equity in Additionol poid-in copiiol" occount P-L6X0O
,{IOA,OOO
- 80,00q / \A0,O0A = 2O?6 ownership before odditionol issuonce of shores
**'[(20,000 + aS,OO('] / + 25,A00il = 36% ownership after additionol issuonce of shdres
UOO.OAA
Or, ollernollvely:
Corrying vclue of 807" ownership before issuqnce
of odditionolshores:
Slockholders' equitY of Sore Co. P600,000
X: OwnershiP interests- ffiT" P 480,000
Cqrrying volue of 647" ownership ofter issuonce
of odditionol shores:
Stockholders' equity of Sore Co. {P6@,000 + PI75,000). ?775,W
X: Ownership interesls. 64% 496.000
Additionol poid-in coPitol.. P_16.@
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