ACTG 6160 Lecture Notes - Lecture 5: Rylands Library Papyrus P52, Retained Earnings, Extension Method
Week 5: Advanced Financial Accounting
Entity Method
• Full Value is $100; Goodwill is $10
• Your Value is $80; Goodwill is $8
• NCI is $20; Goodwill is $2
• FV of assets is $90
Parent-company Extension Method
• Whateer Goodill that does’t elog to us ill ot be included; excludes NCI share of
Goodwill
• Full Value is $98; Goodwill is $8
• Your Value is $80; Goodwill is $8
• NCI is $18; Goodwill is $0
• 100% CV + (100% FVA – NCI % Goodwill) or,
• % CV + % FVA attriutale to NIA + Paret’s Share of Goodill
Proprietary Theory (not to be tested on)
• Vie the susidiary fro the oer’s perspetie
• Your share of the FV of the subsidiary
• Your share of the CV + Your share of the FVA
• Applied by proportionate consolidation method
Entity Theory
• Full FV
• 100% CV + 100% FVA
• Applied by the entity method
Acquisition Method allows for the entity method and the parent-company extension method
Purchase Method
• 100% CV + Our share of FVA or,
• Our share of FV + NCI share CV
Upstream vs. Downstream
• Upstream
o Subsidiary makes the profit; paret’s ad NCI share i susidiary
o If profit is 10, and 80% owned subsidiary, 8 attributable to parent and 2 to NCI
▪ If 5 is unrealized, take 4 away from parent and 1 away from NCI
• Downstream
o Parent makes the profit
o If profit is 10 and 5 is unrealized, attriutale to paret’s SH
• Example (Upstream)
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Entity method: full value is ; goodwill is , your value is ; goodwill is , nci is ; goodwill is , fv of assets is . Parent-company extension method: whate(cid:448)er good(cid:449)ill that does(cid:374)"t (cid:271)elo(cid:374)g to us (cid:449)ill (cid:374)ot be included; excludes nci share of. Proprietary theory (not to be tested on: vie(cid:449) the su(cid:271)sidiary fro(cid:373) the o(cid:449)(cid:374)er"s perspe(cid:272)ti(cid:448)e, your share of the fv of the subsidiary, your share of the cv + your share of the fva, applied by proportionate consolidation method. Entity theory: full fv, 100% cv + 100% fva, applied by the entity method. Acquisition method allows for the entity method and the parent-company extension method. Purchase method: 100% cv + our share of fva or, our share of fv + nci share cv. Upstream vs. downstream: upstream, subsidiary makes the profit; pare(cid:374)t"s a(cid:374)d nci share i(cid:374) su(cid:271)sidiary. If profit is 10, and 80% owned subsidiary, 8 attributable to parent and 2 to nci: downstream.