Cash Flow Statement

Topics: Generally Accepted Accounting Principles, Balance sheet, Revenue Pages: 7 (1049 words) Published: February 19, 2014

Equity Method
If owned shares are 25% or more then Significant influence so Equity Method is used eg. Take 25% of income

Investment Income
= Less % of Dividends Paid + % of Net Income + Impairment Calculation + Amortization of Excess Payment of FV of Assets
Note: Do not record Share Price Increase or Decrease

2013-24, 2013M1-31, 2008-82

Co. Q’s share of the excess of fair value over book value of the asset should be amortized over the life of the asset and charged against investment income in Co. Q’s income statement

Cost or Equity Method

APSE Rules
If % > 25 and shares are Private (ie there is no quoted market values); you can use Cost OR Equity Method
If % > 25 and shares are Public (ie there is no quoted market values); you can use Fair Value though Net Income Income OR Equity Method

2013-24, 2010-84, 2008-82, 2007.76. 2013M2-29

Goodwill (Don’t Use Calculation)
Cash Paid
-FV of Net Assets (BV + FV adjustments)
+ NCI (based on FV of Net Assets)
Note: If the Full Price (Controlling + Non Controlling) is given, use the Full Price * (Non Controlling %) instead of the NCI (based on FV of Net Assets) - 2013M2-54
2007-92, 2008-90

Goodwill for Consolidate Balance Sheet (IFRS - Public Company)

"Fair value Based on Purchase on Jan 1($808,000+$292,000) $1,100,000 Carrying value of FI’s identifiable net assets (given) 897,000 Fair value Difference 203,000 Fair value increment - (CV - FV) 130,000 Balance allocated to goodwill $73,000"

2013-31, , 2013M1-54, 2013S-38, 2013M2-53

Consolidated Net Income

Take 80% of Child:
Net Income
ADD: Dividend Received
ADD: Decreases in FV Difference of Inventory or LESS: Increase in FV Difference in Inventory
ADD: Decrease in FV Amortization of Assets e.g Accounts Receivable
ADD: Increase in FV Amoritization of Liability e.g Accounts Payable or LESS: Decrease in Amoritization of Liability

2013M2-54, 2013S-34

Negative Goodwill
IFRS 3 (negative goodwill resulting from a bargain purchase is a gain in profit or loss on the acquisition date.

(May not need to know)
Non-Controlling Interest
Net Book Value of Asset +/- Cost Transferred

(May not need to know)
Retained earnings at acquisition:
"Retained earnings of the parent only
+ Post acquisition – retained earnings of the parent + the post acquisition increase of the subsidiary’s retained
± accumulated amortization of PPD
= Retained Earnings ending balance"

Joint Venture
Not matter the ownership percentages, ventures share descision making equally.
See Slide 71 in FA2

Development cost capitalization criteria: (5 FRIDS)
"1) Product/process clearly defined, and costs can be identified 2) Technical feasibility has been established
3) Management’s intent is to produce and market or use the product/process 4) If the intent is to sell, a market is clearly defined; if the intent is to use, there is a definable use/need 5) Resources exist to complete the project"

Note: Reseach is never capitalized


Gross Margin Method of Inventory Evaluation
1) GM Rate of Prior Sales = (Sales - COGS) / Sales
2) Beg + Purchase - ??? = Current Sales * GM Rate (Phil to Refine with example)
3) End = ???

"Estimating the ending inventory by the gross margin method requires five steps: 1) Estimate the GM Rate on the basis of prior periods' sales: (sales-COGS) / sales 2) Compute COGAS. (Beg Inv + Purchase) based on actual data provided by the accounts. 3) Compute the estimated GM by multiplying sales by the estimated GM rate. 4)...
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