BUSINESS COMBINATION 1. Statutory Merger - A + B = A 2. Statutory Consolidation = A + B = C 3.

Stock Acquisition = A + B = AB

Acquisition Method or Purchase Method 2 Methods Pooling of Interest

STATUTORY MERGER - Acquisition of all Net Assets (A+B = A; A+B = B) Acquisition Method 1) FV is used. 2) GW may result - in unusual case - (Income from Acquisition/Bargain on Purchase) or Negative Goodwill 3) SHE is eliminated S. Company - Surviving Company D. Company - Dissolved Company STEPS: 1. DETERMINE GOODWILL Formula: COST PP* in Cash PP in Stocks (Bonds Payable) PP in NCA* Contingent Consideration* Acquisition Cost IF:

vs.

FMV of NIA (Net Identifiable Assets) Assets excluding GW @ FMV Less: Liabilities @FMV FMV of NIA

AC > FMV = Goodwill AC < FMV = Income From Acquisition - unusual

* PP - Purchase Price * NCA - Non-cash Assets * Contingent Consideration - Liability 1. Probable Determinable 2. Reliably Measured 2. DETERMINE COST a. Related Cost - Retained Earnings (RE) 1) Direct 2) Indirect b. Stock Issuance Cost - Additional Paid-in Capital (APIC) - Pag hindi na kaya, mapupunta na kay RE - Stocks/shares/SEC - clues na SIC yun Example: 10 sh w/ par value of 10 and FMV of 20. The stock issuance cost is P250.
100 --> Absorbable SIC (APIC) [(20-10) x 10] P 250 150 --> Can't be Absorbed [250-100]

3. CARLA a. C2 - Common Stock of the S. Company - Newly issued common stock at par value b. A3 - APIC of S. Company - APIC from new issue - (Absorbable SIC) c. R4 - RE of S. Company - Income from Acquisition - (Cant be Absorbed) - (Related Cost) d. L3 - Liability of S. Company @BV Book ni S. Company - Liability of D. Company @FV - Contingent Consideration e. A4 - Assets of S. Company @BV - Assets of D. Company @FV - Goodwill - (Cash Payments) ERIKA MAE ARMES RELLORES