Chapter 10: Intercorporate Investments and Business Combinations

In this section

• Accounting Treatments: Cost, Equity, and Acquisition Methods
  Explore the principles of the cost, equity, and acquisition methods for intercorporate investments, focusing on how ownership level and influence drive financial treatment, with real-world examples and helpful diagrams to master these crucial accounting techniques.
• Consolidation, Noncontrolling Interests, and Goodwill Implications
  Explore how consolidated financial statements bring together parent and subsidiary accounts, the treatment of noncontrolling interests in equity, and the intricacies of goodwill measurement and impairment under IFRS and US GAAP.
• Joint Ventures and Proportionate Consolidation
  Explore joint ventures under IFRS and US GAAP, focusing on the equity method versus proportionate consolidation, along with how these treatments influence key financial ratios.
• Effects on Financial Statements and Ratios
  Explore how cost, equity, and acquisition methods impact reported financials and key ratios such as debt-to-equity, return on equity, and coverage metrics. Understand how to interpret consolidated statements for more accurate financial analysis.
• Step Acquisitions and Partial Disposals
  Explore how incremental equity acquisitions and partial stake reductions affect consolidation, goodwill, and earnings under IFRS 3 and ASC 805.
• Pushdown Accounting and Reverse Acquisitions
  Explore the practical application and implications of pushdown accounting, as well as the unique legal and accounting dynamics behind reverse acquisitions.
• Contingent Consideration in Business Combinations
  In-depth exploration of contingent consideration (earn-outs), its fair value measurement, and implications on financial reporting under IFRS and US GAAP.
• Accounting for Bargain Purchases
  Learn how IFRS 3 and ASC 805 treat bargain purchases (negative goodwill), why careful reassessment of asset valuations is crucial, and how distressed sales can lead to immediate gains in income statements.
• IFRS 10, IFRS 11, IFRS 12 Alignment with US GAAP
  Explore how IFRS 10, IFRS 11, and IFRS 12 align with US GAAP principles on consolidation, joint arrangements, and disclosure. Understand key definitions of control, variable interest entities (VIEs), and investment entity exceptions to gain a deeper grasp of intercorporate investments and business combinations.
• Illustrative Goodwill Calculation and Full vs. Partial Goodwill Methods
  A deep dive into the two main approaches for calculating goodwill—full goodwill versus partial goodwill—including practical examples, IFRS and US GAAP comparisons, best practices, and insights for CFA 2025.