Consolidation After Acquisition: Acquisition Differential & Impairment

A CGU has a carrying amount of 500, fair value less costs of disposal of 460, and value in use of 520. Is it impaired under IAS 36, and by how much?

An indefinite-life intangible (or one not yet available for use) shows no impairment indicators all year. What testing is still required, and what does the indicator-based shortcut get wrong?

When testing an asset for impairment, finding just one of FVLCD or value in use can sometimes end the test early. When does that shortcut work, and when does it fail?

On consolidation after acquisition, how is the acquisition-differential portion assigned to land or goodwill treated differently from the portion assigned to a building?

A CGU's goodwill was written down for impairment; in a later year its recoverable amount recovers. Can any of the prior goodwill impairment be reversed?

For PP&E and definite-life intangibles under IAS 36, what triggers actually computing a recoverable amount — and how does that trigger differ from indefinite-life intangibles?

Recoverable amount is the higher of FVLCD and value in use. What distinguishes the two inputs, and which one captures an asset worth more to this entity than the market would pay?

When splitting consolidated net income between the parent and NCI, what must be done to the subsidiary's reported income before applying the ownership percentages?

Why can an asset be impaired at the consolidated level but not on the subsidiary's own books?

What is a cash-generating unit (CGU) under IAS 36, and when is impairment tested at the CGU level instead of on the individual asset?

The acquisition differential assigned to a depreciable asset is amortized on consolidation. What is the effect on consolidated net income in later years, and what does an analyst get wrong by ignoring it?

Under the equity method on the parent's own books, the investment starts at cost. Apply: parent's share of subsidiary net income +80, dividends received 30, differential amortization/impairment 12. Which way does each move the account, and what should the ending balance reconcile to?

A parent acquires a subsidiary mid-year. What subsidiary results enter the consolidated income statement in the year of acquisition, and what does the prior-year comparative column show?

The consideration a parent pays is below the carrying amount of the subsidiary's net assets. Does this negative acquisition differential mean negative goodwill (a bargain purchase gain)?

The subsidiary already carries goodwill on its own balance sheet from a past combination. What happens to that pre-existing goodwill when the new parent consolidates?

In its own internal books a parent can account for a subsidiary using the cost method. What triggers income recognition under it, and why is it considered the simpler choice?

If a parent applies the equity method fully and correctly to a subsidiary, how do its own net income and retained earnings relate to the consolidated statements — and what is the only real difference?

Why must a Canadian parent still prepare nonconsolidated (separate-entity) statements, and why are tax authorities indifferent to whether it uses the cost or equity method?

A bank demands the parent's separate-entity statements be prepared under IFRS. What measurement options does IAS 27 allow for the investment in the subsidiary?

Analysts often conflate 'consolidated net income' with 'consolidated net income attributable to the parent's shareholders.' Why are they different, and what does the latter equal?

At the acquisition date consolidated retained earnings equal only the parent's. How do consolidated retained earnings and the NCI account each change in the years that follow?

Since 2011 under IFRS, which standard governs impairment of most assets, what condition defines an impaired asset, and where is the write-down reported?

For property, plant and equipment and definite-life intangibles, what specific events actually put management on notice to test for impairment?

An indefinite-life intangible must be impairment-tested annually. When during the year can that test be done, and is there any extra rule for one recognized this year?

IAS 36 lets an entity, in exceptional cases, reuse a prior period's recoverable amount instead of recalculating. What three conditions must all be met?

Goodwill cannot generate cash on its own, so it is tested within a CGU. What two constraints cap how a CGU carrying goodwill may be defined, and how often must it be tested?

A CGU that contains goodwill is found impaired. In what order is the impairment loss written off against the unit's assets?

When recoverable amount is estimated with a discounted-cash-flow model, which key management assumptions drive the result — and why does that make the figure so judgmental?

Part of an acquisition differential was assigned to the subsidiary's inventory, which it accounts for under FIFO. What happens to that inventory portion of the differential in the first post-acquisition year?

What is the purpose of a 'changes-to-acquisition-differential' schedule, what three amounts does it track each year, and where does the differential ultimately end up?

Consolidating several years after acquisition while the parent uses the cost method: how much of the acquisition-differential change hits this year's income, and how are consolidated retained earnings at the start of the year found?

When you allocate consolidated net income to the noncontrolling interest, why is it wrong to simply take the NCI percentage of the subsidiary's reported net income?

At a reporting date, how do you build the noncontrolling interest figure shown in consolidated shareholders' equity, and which two events move it during the year?

A subsidiary pays a cash dividend. How does each portion flow through the consolidated statements, and why does the consolidated retained earnings statement show none of it?

A subsidiary's bonds were issued at par, but by the acquisition date market rates have fallen so the bonds are now worth more than par. How is that difference handled on consolidation?

For the premium or discount created when acquisition brings a subsidiary's debt to fair value, which amortization method does IFRS require, and when is straight-line still defensible?

What does the single-entity concept require for a transaction between a parent and its subsidiary, and what happens to consolidated equity when you eliminate an intercompany receivable and payable?

A parent buys 80% of a subsidiary on September 30 with a December 31 year-end. What subsidiary results enter the first consolidated income statement, and how is that partial-period income split?

Because a mid-year acquisition makes year-over-year comparison hard, what supplementary information does IFRS 3 require the combining entity to disclose?

Why is the equity method called 'one-line consolidation,' and what two equalities should always hold between the parent's own books and the consolidated statements?

A parent can keep its investment under the cost or the equity method. Which separate-entity accounts actually differ between the two, and does the choice change the consolidated statements?

Under the equity method, the investment-in-subsidiary balance can be split into two meaningful components at any date. What are they, and what does the split let you verify?

When computing return on equity from consolidated statements, why must you specify 'whose' return you mean, and how do the two versions differ in numerator and denominator?

Comparing a parent's separate-entity statements with the consolidated statements, which set makes the group look most highly leveraged, and why?

Under ASPE, must a private company consolidate its subsidiaries the way IFRS requires? What options does it have, and how must the results be presented?

How does the trigger for impairment-testing goodwill and indefinite-life intangibles under ASPE differ from IFRS, and how is any ASPE loss measured?

Under ASPE the impairment test for PP&E and definite-life intangibles has three steps. What distinguishes its recoverability screen from the IAS 36 approach?

After the acquisition date, what must happen to the acquisition differential period by period, and what tool keeps track of it?

When a subsidiary's goodwill is impaired, why does the effect on the noncontrolling interest depend on whether the fair-value-enterprise or identifiable-net-assets method was used?

When an acquired subsidiary comprises several cash-generating units, when are those units identified, and how is goodwill spread among them?

You are impairment-testing a CGU that contains goodwill, and one asset inside it shows impairment indicators. In what order must the tests be run?

A CGU containing goodwill is impaired. In what order is the loss absorbed by the unit's assets, and what floor limits how far any single asset can be written down?

Testing a non-wholly-owned CGU for goodwill impairment under the identifiable-net-assets method, why must the carrying amount be adjusted before comparing it to the recoverable amount, and who bears part of the loss?

Beyond a discounted-cash-flow model, what other evidence can support the recoverable amount of a CGU, and when is one source particularly useful?

Under the PCT method with a non-wholly-owned foreign subsidiary, where do the exchange losses from translating both the subsidiary's statements and its acquisition differential end up, and how is the noncontrolling interest involved?

A parent owns 80% of a subsidiary. At what percentage of fair value are the subsidiary's assets and liabilities brought onto the consolidated balance sheet?

Impairment losses on most assets can be reversed later. Under IAS 36, what must have changed to justify a reversal, what ceiling caps it, and why is goodwill the exception?

A machine's carrying amount is above its undiscounted future cash flows. IFRS and ASPE both flag possible impairment — but how do the trigger test and the resulting write-down differ between the two frameworks?

An equity-method investment (an associate or subsidiary carried on one line) shows impairment indicators. How is it tested, and why is its impairment treated more leniently than goodwill inside a CGU?

A parent uses the cost method internally; a competitor uses the equity method. Will their consolidated financial statements differ?

The parent's balance sheet carries an 'investment in subsidiary' account. What replaces it on the consolidated balance sheet?

IAS 36 already defines a CGU as the smallest group generating largely independent cash inflows. For a unit that carries goodwill, what additional practical criterion pins down the level?

Goodwill must be impairment-tested annually, but does the entity have to rebuild a full recoverable-amount calculation every single year?

In the working-paper approach to consolidation, where do the elimination entries live, and can two accountants using different elimination entries both be correct?

When a foreign subsidiary is bought at a price that creates an acquisition differential, at what exchange rate is that differential first translated, and why does that rate matter later?

After acquisition, translating a foreign subsidiary's acquisition differential under the functional-currency (FCT) method versus the presentation-currency (PCT) method produces one crucial difference. What is it?

Goodwill inside a foreign subsidiary's acquisition differential is retested every period. Why is it translated at the historical rate under the FCT method rather than at a current rate?

The subsidiary pays a dividend to the parent. Why does that dividend never show up on the consolidated statements?

How is the acquisition differential defined at the acquisition date, and in what order is it assigned once computed?