Special Appendix 1 Possible New Consolidation Procedures Goodwill

Special Appendix 1 Possible New Consolidation Procedures - Goodwill SA #1

FASB Proposal for Consolidations u. The NCI would share in the adjustments to fair value made on the purchase date u. Two alternatives – Economic Unit Theory with Full Goodwill All accounts including goodwill would be adjusted to 100% of fair value – Economic Unit Theory with Goodwill only on Controlling Interest All accounts, except goodwill, would be adjusted to 100% of fair value. SA #1 2

Adjustments on the D&D Schedule SA #1 3

D&D: Parent Company Concept Price paid $500, 000 Interest acquired (80% 400, 000) 320, 000 Excess of cost over book value 180, 000 Building (80% 125, 000) 100, 000 Goodwill 80, 000 SA #1 4

D&D: Economic Unit, Full Goodwill NCI Control Total Price paid $500, 000 Interest (80% 400, 000) 320, 000 Excess 180, 000 Building $25, 000 100, 000 $125, 000 Goodwill 20, 000 80, 000 100, 000 Total goodwill: $80, 000 80% = $100, 000 Total Adjustments: SA #1 $45, 000 $180, 000 $225, 000 5

D&D: Economic Unit, Goodwill Only on Controlling Interest NCI Control Total Price paid $500, 000 Interest (80% 400, 000) 320, 000 Excess 180, 000 Building $25, 000 100, 000 $125, 000 Goodwill n/a 80, 000 Total Adjustments: SA #1 $25, 000 $180, 000 $205, 000 6

Worksheet Modifications u. NCI equity account added – picks up NCI share of adjustments – used for prior period amortizations applicable to NCI – is extended to NCI column u. Amortizations include NCI share of adjustments u. Sub IDS picks up amortizations of excess – this allows adjustments to be shared by parent and sub SA #1 7