QUEZON CITY UNIVERSITY

BACHELOR OF SCIENCE IN ACCOUNTANCY

COURSE TITLE : Accounting for Business Combinations

COURSE CODE : ACPBCOM
NUMBER OF UNITS : 3 units
PRE-REQUISITE COURSE : ACCINTC

COURSE DESCRIPTION:

This course deals mainly with consolidation and mergers, parent-subsidiary relationships, and
consolidated statements, including foreign subsidiaries. The other topics deal with accounting for
the effects of changes in foreign exchange rates and other similar current issues. Also discussed
are debt restructuring, accounting for financially distressed corporations , accounting for the
winding up of an enterprise and accounting variations among countries.

After successful completion of this course, the student is expected to:

1. Demonstrate the required journal entries to record the business combination, acquisition and
also the goodwill on combination.
2. Discuss all eliminating entries necessary to prepare consolidated financial statements.
3. Prepare a working paper and Consolidated Financial Statements immediately after the
merger or acquisition of the assets and activities.
4. Evaluate the consolidated income attributable to the Parent Company
5. Calculate the amount of exchange gain or loss that will appear in the company’s statement of
comprehensive income

Textbooks and references:

1. Guerrero, Pedro, P. And Peralta, Jose F. Advanced Accounting, Vol. 2 2017 Edition.
Manila: GIC Enterprises & Co. Inc.
2. Milan, Zeus Vernon E, Accounting for Special Transactions (Advanced Accounting II)
2020 Edition

Requirements:
1. Class Participation
2. Quiz/Recitation/Assignments/Seatwork/Output
3. Major Examination
DETAILED COURSE OUTLINE

Week Hours Topic Learning Outcomes Strategies/ Assessment of

Activities Learning
Outcomes
1-2 6 Classroom Policies and introduction  Define Business Combination Lecture /
 Compute the goodwill on Discussion Recitation on the
Discussion on the course Syllabus combination and the non- topic.
controlling interest in accordance Recitation/Assignment
1.0 Business Combinations (IFRS 3) with IFRS / Seatwork/Group Students to answer
 Enumerate the necessary journal Activity/Case studies exercises and
1.1 Business Combination Defined entries for the acquisition in the problems related to
Identifying a business books of the acquiring company the topic.
1.2 Acquisition of Control  Discuss the different steps in the
1.3 Methods of Business combination application of acquisition method. Quiz on the topic.
1.4 Acquisition Method of Accounting of Business  Explain the accounting
Combination procedures in recording the
 Identify the Acquirer acquisitions.
 Determine the Acquisition Date  Analyze and compute goodwill
 Determine the Consideration Given  Determine the consideration
 Contingent Consideration given by the acquirer to record
 Acquisition related costs and measure the acquiree’s assets
 Records and Measures the Acquiree’s and Liabilities
Assets and Liabilities Assumed  Discuss the accounting
1.5 Valuation of Identifiable Assets and Liabilities procedures involved in the
 Cash and cash Equivalents, Short-term acquisition if the price paid
Monetary Assets and deferred exceeds or less than the fair value
Considerations of net identifiable assets acquired.
 Equity instruments Transferred
 Assets with uncertain Cash Flows  Illustrate control of another
(Valuation Allowances) company by acquisition of assets
 Unrecognized Assets and Liabilities or by acquisition of stock
1.6`Applying Acquisition Method
Acquisition of Net Assets  Describe application of
 Books of the Acquirer Acquisition method
o Accounting Procedures in Recording
the Acquisition  Demonstrate both from the books
o Recording Contingent Consideration of the Acquirer and from the
in Acquisition of Net Assets books of Acquiree the effects of
o Recording Changes in Contingent the acquisition.
Consideration  Compute goodwill based on the
o Recording Changes in Value During the consideration given or a gain
Measurement Period from a bargain purchase.
 Books of the Acquiree  Prepare a Financial Position,
 Financial Statements following the Statement of Comprehensive
Acquisition of Assets Income after the acquisition of Net
1.6 Acqusitions of Stock Assets.
 Recognizing and Measuring Goodwill or a  Exhibit and understand the
Gain from A Bargain Purchase relevance of disclosure
 Impairment Test of Goodwill requirements per IFRS 3
 Recording Contingent Considerations in
Acquisition of Stock
 Changes in Fair Value of Contingent
Consideration
1.8 Disclosure Requirements
3-4 6 2.0 Consolidated Statement of Financial Position-  Explain the meaning of IFRS 10 Lecture / Recitation on the
Date of Acquisition  Discuss the difference between a Discussion topic.
2.1 Nature of Consolidated Statements parent and a subsidiary company.
2.2 Conditions for Consolidated Statementys  Explain the applicable ruling how Recitation/Assignment Students to answer
2.3 Control parent company and all its / Seatwork/Group exercises and
2.4 Techniques of Consolidated Statement of subsidiaries must present Activity/Case studies problems related to
Financial Position consolidated financial statements the topic.
2.5 Acquisition of Assets and Stock Acquisition and the exemptions if applicable.
Compared  Discuss the two methods of Quiz on the topic.
 Asset Acquisition – A Brief Review achieving control over the assets
 Stock Acquisition of another company
2.6 Consolidated Statement of Financial Position-  Illustrate the journal entries that
Date of Acqusition will appear on the books of parent
 Acquisition of Wholly Owned Subsidiary company for asset acquisition and
(100% Interest) stock acquisition.
 Acquisition of Partially Owned Subsidiary  Discuss the scenario for
(Less than 100%) acquisition of partially owned
2.7 Measurement of Non-Controlling Interest subsidiary (Less than 100%) and
 Adjustment of Goodwill Applicable to NCI Acquisition of wholly owned
2.8 Techniques in the Calculation and Allocation subsidiary (100% interest)
of Goodwill and/or Gain on Acquisition
2.9 Subsidiary’s Pre existing Goodwill  Compute goodwill and/ or Gain on
2.10 Step Acquisition Acquisition
 Fair Valuing Previously Held Stake  Explain the meaning of push-
 Goodwill on Combination down accounting and how it is
2.11 Push –Down Accounting shown in the financial statements.
2.12 Reverse Acquisition
 Calculating the Fair Value of Consideration
Traansferred
 Measuring Goodwill
5-6 6 3.0 Consolidated Financial Statements-Subsequent  Prepare Consolidated Financial Lecture / Recitation on the
to Date of Acquisition (IFRS 10) Position, Statement of CI after the Discussion topic.
date of acquisition
3.1 Uniform Accounting Policies  Translate how Uniform Recitation/Assignment Students to answer
3.2 The Consolidated Process Accounting Policies applies to / Seatwork/Group exercises and
3.3 Accounting Procedures reporting requirement of Parent Activity/Case studies problems related to
3.4 Consolidated Comprehensive Income Company the topic.
 Parent Company Approach  Differentiate the Parent Company
 Entity Approach Approach and Entity Approach Quiz on the topic.
3.5 Accounting for Investments in Subsidiary relating to the preparation of
 Cost Method Statement of Comprehensive
 Fair Value Method Income.
 Equity Method  Analyze and differentiate the
3.6 Consolidation: Wholly Owned Subsidiary various methods in recording
 Acquisition at Book Value investment in subsidiary
 First Year After Acquisition o Cost Method
 Consolidated Financial Statements o Fair Value Method
 Second and Subsequent years After o Equity Method
Acquisition  Discuss the process in preparing
3.7 Consolidation: Partially Owned Subsidiary the working, consolidated
3.8 Acquisition at Book Value financial position,
 First Year After Acquisition consolidated statement of
 Consolidated Financial Statements comprehensive income and
3.9 Consolidation: Partially Owned Subsidiary Retained Earnings for wholly
3.10 Acquisition at Other than Book Value Owned subsidiary and Partially
 First Year After Combination Owned subsidiary.
 Second Year After Combination
3.11Subsidiary that has a Different Reporting Date
3.12 Accounting for Loss of Control
 Sale of Inerest Not Resulting in Loss of
Control
7-8 6 4.0 Intercompany Profit Transactions- Inventories  Analyze what are the Lecture / Recitation on the
4.1 Intercompany Sales at Cost intercompany transactions and Discussion topic.
4.2 Intercompany Sales at a Profit or Loss Eliminate the unrealized profits
4.3 Effect of Inventory System Used And losses in the consolidated Recitation/Assignment Students to answer
4.4 Downstream sale of Inventory Comprehensive income. / exercises and
 Resale in the Year of Intercompany Sale Seatwork/Group problems related to
 Resale in the Subsequent Year following  Illustrate or compute how Activity/Case studies the topic.
o Intercompany Sales:Unrealized intercompany transactions in a
o Intercompany profit in ending downstream sale of inventory and Quiz on the topic.
Upstream sale of inventory from
inventory
subsidiaries to parent company
4.5 Upstream Sales of Inventory
Should appear in the consolidated
 Unrealized Intercompany profit in ending
Statement of comprehensive
inventories
income.
 Intercompany profit in beginning and
ending inventories
4.6 Summary Comparison of Working Paper
 Elimination Entries
4.7 Comprehensive Illustration
4.8 Elimination Procedures for Periodic Inventory
System – Trial Balance Approach Working
Paper
4.9 Effect of Lower of Cost or Market on Inventory
Profit
5.0 Intercompany Sales of Property, Plant  Explain the accounting treatment
and Equipment between intercompany sales of
5.1 Intercompany Gain on Sale of Non-Depreciable property and equipment and
Fixed Assets intercompany sales of merchandise. Lecture /
5.2 Overview of Profit Elimination Process Discussion
5.3 Assignment of Unrealized Profit Elimination
5.4 Subsequent Disposition of Asset Recitation/Assignment
5.5 Intercompany Sale Involving Depreciable /
Assets Seatwork/Group
 Activity/Case studies
 Downstream Sale
 Upstream Sale
9 3 Mid-term examination.

10-12 9 6.0 Investments in Joint Arrangements, Associates  Define joint Arrangement Lecture / Recitation on the
And Joint Ventures (IFRS11 and IAS28)  Identify the Contractual Discussion topic.
6.1 Investment in Joint Arrangements Arrangement
6.2 Contractual Arrangements  Classify Joint Arrangement Recitation/Assignment Students to answer
 Joint Control  Define Joint Venture and Joint / exercises and
6.3 Classification of Joint Arrangements Operation Seatwork/Group problems related to
 Joint Operation Activity/Case studies the topic.
 Joint Venture
6.4 Structure of Joint Arrangement Quiz on the topic.
 Joint Arrangement not structured  Discuss the different
 Joint Arrangement structured characteristics of a Joint
6.5 Accounting for Joint Operation Arrangement structured and not
6.6 Accounting for Joint Ventures structured.
6.7 Investment in Associates
 Equity method of Accounting for an  Define the concept of Associates
associate
 Components of Carrying Amount of  Know the accounting treatment
investment under equity method of
6.8 Preparation of Consolidated Financial accounting for an associate.
Statements
6.9 Transactions with an Associate of Joint  Explain the provision of IAS 27
Venture and IAS 28 for the preparation of
 The Principle of Partial Elimination financial statements of an
 Intercompany Sales of Inventories with Investor without subsidiaries
an Associate of Joint Venture
 Intercompany sale of Property, Plant and
Equipment
6.10 Separate Financial Statements of an Investor
 Without Subsidiaries
6.11 Share of Losses in Associates and Joint
Venture
6.12 Changes in Ownership Interest  Illustrate the changes in ownership
 Associate becomes a Joint Venture or Vice interest when an increase in stake
Versa or decrease in stake occurs.
 Increase in Stake
 Decrease in Stake
6.13 Other Intercompany Balances with an
Associate or Joint Venture  List other Intercompany balances
6.14 Investment in Joint Venture for Small and With an Associate or Joint venture
Medium-Size Entities (SMEs) apart from equity investment.
 Joint Venture Defined  Classify the different forms of
 Forms of Joint Venture Joint Venture, and describe each:
o Jointly Controlled Operations o Jointly controlled operations
o Jointly Controlled Assets o Jointly controlled assets
o Jointly Controlled Entities o Jointly controlled entities
 Transactions of a Venturer and Joint
Venture

13 -14 6 7.0 Accounting For Foreign Currency Transaction Lecture / Recitation on the
7.1 Conversion and Translation/Currency  Define Foreign Currency Discussion topic.
Exchange rate Transaction
7.2 Accounting For Foreign Currency  Discuss the different steps involve Recitation/Assignment Students to answer
Transactions and the required documents that / Seatwork/Group exercises and
 Importing and Exporting Goods must be secured for importation. Activity/Case studies problems related to
o Importing Transactions  Define Marginal Deposit on Recitation on the the topic.
o Marginal Deposit on Letter of Credits Letter of Credit topic.
o Two Transaction Perspective and Quiz on the topic.
o One Transaction Perspective
o Exporting Transactions
o Loans Payable Denominated in
 Foreign Currency
o Loan Receivable Denominated in
Foreign Currency

 Explain what are Derivatives and

7.3 Derivatives its characteristics
7.4 Hedging
 Hedge Accounting
7.5 Foreign Currency Forward Contracts  Discuss Hedge Accounting
7.6 Fair Value of an Exposed Net Asset or Net  List down the different conditions
Liability Position that must be present to qualify for
 Hedging an Exposed Net Liability Position Hedge Accounting
 Hedging an Exposed Net Asset Position
 Fair Value Hedge of a Foreign Currency
Denominated Commitment
7.7 Cashflow Hedge of a Foreign Currency
Forcasted Transaction
7.8 Swapts, Option Contracts and
Foreign Currency Option
7.9 Hedging Disclosure

8.0 Translation of Foreign Financial Statements  Enumerate the different steps in

(IAS21) the translation and consolidation Lecture /
8.1 Accounting Procedure of the foreign entity financial Discussion
8.2 Definition of Key Terms statements Recitation on the
8.3 Translation of Financial Statements of Foreign  Define Key Terms Recitation/Assignment topic.
Operation/The Closing rate method o Functional currency / Seatwork/Group
8.4 Comprehensive Illustration of the Practical o Exchange difference Activity/Case studies Students to answer
Application o Foreign Operation exercises and
8.5 Translation of Foreign Financial Statements o Closing rate problems related to
Under Hyperinflationary Economy o Spot rate the topic.
8.6 Accounting for Inflation o Presentation Currency
 Restatement of Statement of Financial Quiz on the topic.
 Identify under what circumstances
 Position when a restatement of Financial
 Restatement of Statement of Comprehensive Position and Restatement of
Income Comprehensive Income need to be
made.
8.7 Hedging a Net Investment in a Foreign Equity  Illustrate the accounting treatment
for the effects of gain and losses
arising from foreign currency
transactions.

15 – 16 6 9.0 Corporations in Financial Difficulty:

Liquidation

9.1 Introduction - Insolvency Students to discuss

Identify the various reasons why
Lecture. the different factors
9.2 Liquidation versus Reorganization and Debt company suffer losses from that affect
restructuring operations. Discussion. company’s
9.3 Corporation Liquidation operation
a. Financial Report Determine the best alternative for Illustration
b. Statement of Affairs Debtor Corporation i.e.; Liquidation, Problem.
c. Estimated amounts to be Recovered by Each Re-organization or Debt restructuring Students able to
Class of Creditors Board Work. evaluate and
compare
Compute settlement to creditors Seat Work. Different options.
9.4 Accounting and reporting for Trustee/Receiver

Compute Debt restructuring Assignment. Students to solve /

9.5 Statement of Realization and Liquidation
Settlement to
Prepare the Statement of Realization creditors.
and Liquidation
Students to prepare /
submit different
financial reports

Students to answer
 exercises.

Quiz on the topic.

17 3 10.0 Corporations in Financial Difficulty: Formulate business policy that will Application of the
Reorganization and Troubled Debt improve/boost company’s operations Lecture. adopted policies to
Restructuring enhance sales and
Discussion. operation.
10.1. Reorganization Illustration Students are able to
10.2 Plan for Re-organization To prepare the journal entries Problem. demonstrate the
10.3 Accounting for Re-organization corresponding to the provisions of the accounting for
10.4 Troubled Debt Restructuring proposed reorganization plan. Board Work. various forms of
10.5 Illustration of Troubled Debt Restructuring debt restructuring.
Seat Work.
Students to answer
Assignment. exercises.

Quiz on the topic.

18 3 Final Examination
EXPECTATIONS FROM STUDENTS:
1. The student is responsible to come to each class prepared.
2. The student is expected to take all examinations on the date scheduled.
3. The student is expected to read the assigned chapter and solve exercises/problems prior to
Class.
4. The student is expected to attend each class and participate actively in the discussions.
5. The student is expected to do the seatwork/exercises that will be assigned by the instructor
inside the classroom.

ACADEMIC DISHONESTY:
Academic dishonesty is subject to University’s rules and regulations.

POLICY on ABSENCES:
1. Missed Classes: Students who miss class are responsible for content. Any student who
misses a class has the responsibility for obtaining copies of notes, handouts, assignments,
etc. If additional assistance is still necessary, an appointment should be scheduled with
the instructor. Class time is not to be used to go over material with students who have
missed class.
2. Incurrence of three tardiness is equal to one absence.
3. Incurrence of three consecutive absences is considered unauthorized dropped.
4. Incurrence of four absences is considered unauthorized dropped.

GRADING SYSTEM:
Midterm Grade (MG) Pre-Final Grade (PFG)
Midterm Exam Final Exam 40%
Class Standing 40% Class Standing 60%
60% Assignment 10%
Assignment 10% Recitation 10%
Recitation 10% Test/Quiz 20%
Test/Quiz 20% Output/Seatwork 20%
Output/Seatwork 20% 100%
100%
Final Grade (FG)= (MG + PFG) / 2

POINT POINT
GRADE REMARKS GRADE REMARKS
Equivalent Equivalent
98-100 1.00 Excellent 77-79 2.75 Satisfactory
95-97 1.25 Excellent 75-76 3.00 Passed
92-94 1.50 Very Good Below 75 5.00 Fail
89-91 1.75 Very Good INC Incomplete
86-88 2.00 Good OD Officially Dropped
83-85 2.25 Good UD Unofficially Dropped
80-82 2.50 Satisfactory
Prepared by: Approved by: Noted by:

Manuel V, Lim, CPA Dr. Gerardo T. Bautista Dr.Glenda A. Rebucas

Faculty Member Acting Dean Acting Vice President for
Academic Affairs

I have read the course syllabus and I understand that I have to comply with the requirements of
the course and the expectations from me as a student of ______________ during the __ Semester
of _________. I am fully aware of the consequences of non-compliance with the above-
mentioned requirements and expectations.

________________________________
Printed name and signature of student

________________________________
Date