USA Business Combination - What happens to the Sub?

[Lily0208]

Hello,

My company (Company A) recently acquired 100% of the shares of a company in Australia (Company B).They will continue operations and keep their own accounting records which we will consolidate at YE. I have never done purchase accounting but this is what I gather:

Company A will book the FV of identified assets and liabilities and recognize goodwill (following the steps of ASC 805 Topic). My question is, if we book all the assets and liabilities at FV in Company A, what happens on Consolidation? Wouldn't all the assets and liabilities be doubled because company B has them all at book value in heir own books? What happens to the amounts booked on Company A's books?. I. E if we book liabilities and they are repaid, the repayments will be reflected on company B's books, not on company A.

Could Company A book Dr Investment in Company B Cr Cash , for the amount of the consideration transferred, and have all the assets and liabilities remeasured at FV + goodwill at the subsidiary level ( Pushdown accounting like)?

Any JE examples would be appreciated (for both the parent and the new subsidiary).

Thank you!

 

[kirby]

If the books of the Australian sub are kept in AUD you will also have foreign currency translation issues. I suggest you acquire good acctg textbooks which cover corporate consolidation and fx translation to thoroughly educate yourself on these topics. Asking piecemeal questions is not sufficient to get you through this.
I get it that some of the best textbooks are expensive but you can rent them for 4 months or so.
Also, if your AUS sub uses IFRS you need to know how to handle reporting that in US GAAP.

 

[simply_slmn]

Further to add on Kirby's comment above, Company A should not book assets and liabilities, but will book an investment at cost of acquisition of subsidiary.

At the time of consolidation, i.e. at YE, the Company A will eliminate the investment against Company B's common shares and record the fair value adjustment as at YE (giving further effects of depreciation and amortization due to increase in value of assets due to fair value).

 

[Praz Finpoint]

First of all, Company A stand-alone books, does not recognize any of the Assets and Liabilities of Company B. Only an Asset of Investment in Subsidiary B.

Only upon consolidation of Company B into Company A to prepare a Group Financial Statement, do you derecognize the Asset of Investment in Subsidiary B in Company A books, and then record all the Assets and Liabilities of Company B, at Fair Value, at time of the acquisition, along with the Goodwill.

I didn't get the question "if we book liabilities and they are repaid, the repayments will be reflected on company B's books, not on company A." - does the liability and repayment belong to Company A or Company B?