Business Combinations (Advanced)

Step acquisition

• Remeasure previously held interest to fair value → gain or loss in earnings.
• Goodwill = consideration + noncontrolling interest (NCI) fair value + previously held interest fair value − net assets.

Ownership changes

• Control kept → equity transaction (additional paid-in capital (APIC)), no gain or loss.
• Control lost → deconsolidate; retained interest at fair value; gain or loss in income.

Intra-entity profit

Downstream: all to parent. Upstream: shared between parent and NCI.

Variable interest entities (VIEs)

• Insufficient equity at risk, or equity holders lack power, loss absorption, or returns.
• Primary beneficiary = power + significant losses or benefits → consolidates.

Other

• Push-down accounting: optional, irrevocable.
• New joint ventures: fair value basis (from 2025).
• Common control: carrying amounts, no goodwill.
• Reverse acquisition: legal acquirer = accounting acquiree.

Exam traps

• A VIE's primary beneficiary may own little or no voting equity — consolidation follows power and economics, not ownership percentage.
• Push-down accounting is the acquiree's election, in its own separate statements.
• Measurement-period adjustments are recorded in the period they're determined — prior periods aren't restated.
• Consolidated net income includes the NCI's share; net income attributable to NCI is shown separately on the face of the income statement.