(Before Acquisition) (After Acquisition) : Conjunction Co. Combined Entity
(Before Acquisition) (After Acquisition) : Conjunction Co. Combined Entity
2. On January 1, 20x1, OBDURATE Co. acquired 30% ownership interest in STUBBORN, Inc. for
₱200,000. Because the investment gave OBDURATE significant influence over STUBBORN, the
investment was accounted for under the equity method in accordance with PAS 28.
From 20x1 to the end of 20x3, OBDURATE recognized ₱100,000 net share in the profits of the
associate and ₱20,000 share in dividends. Therefore, the carrying amount of the investment in
associate account on January 1, 20x3, is ₱280,000.
On January 1, 20x4, OBDURATE acquired additional 60% ownership interest in STUBBORN, Inc. for
₱1,600,000. As of this date, OBDURATE has identified the following:
a. The previously held 30% interest has a fair value of ₱360,000.
b. STUBBORN’s net identifiable assets have a fair value of ₱2,000,000.
c. OBDURATE elected to measure non-controlling interests at the non-controlling interest’s
proportionate share of STUBBORN’s identifiable net assets.
3. OBSTREPEROUS Co. and NOISY, Inc. both engage in the same business. On January 1, 20x1,
OBSTREPEROUS and NOISY signed a contract, the terms of which resulted in OBSTREPEROUS
obtaining control over NOISY without any transfer of consideration between the parties.
The fair value of the identifiable net assets of NOISY, Inc. on January 1, 20x1 is ₱2,000,000. NOISY
chose to measure non-controlling interest at the non-controlling interest’s proportionate share of the
acquiree’s identifiable net assets.
Additional information:
In addition to the business combination transaction, the following have also transcribed during the
negotiation period:
a. After the business combination, TRANSPARENT will enter into liquidation and DIAPHANOUS
agreed to reimburse TRANSPARENT for liquidation costs estimated at ₱40,000.
b. DIAPHANOUS agreed to reimburse TRANSPARENT for the appraisal fee of a building
included in the identifiable assets acquired. The agreed reimbursement is ₱20,000.
c. DIAPHANOUS entered into an agreement to retain the top management of TRANSPARENT for
continuing employment. On acquisition date, DIAPHANOUS agreed to pay the key employees
signing bonuses totaling ₱200,000.
d. To persuade, Mr. Five-six Numerix, the previous major shareholder of TRANSPARENT, to sell
his major holdings to DIAPHANOUS, DIAPHANOUS agreed to pay an additional ₱100,000
directly to Mr. Numerix.
e. Included in the valuation of identifiable assets are inventories with fair value of ₱180,000. Ms.
Vital Statistix, a former major shareholder of TRANSPARENT, shall acquire title to the goods.