Purchase of the shares of one entity, consolidation from equity method to full consoldiation

Hi,

I have one question. In case that our company holds 49,9% (consolidated under equity method) of the shares of another company, and we bought this year the rest of the shares (50,1%).

In the contract, the purchase price is 1,8 M€ with compensation for the future restructurations of 0,6M€, which led to a total consideration paid by us of 1,2M€ in cash.

My question is :
- At the statutory level, what's the book value of the shares to be booked by the holding? is it 1,8M€ or 1,2M€? If it was 1,8M€, where should I book the 0,6M€ of the compensation?
- At the consolidation level, I know that this is a purchase of one entity with a change in the consolidation method, with +/- profit from the selling of the 49,9% of the shares and purchase of the company at 100%€ with the calculation of the goodwill. Do I have to calculate the goodwill with consideration paid of 1,8M€ or do I have to calculate it with consideration paid of 1,2M€?

Thank you for your advice

Hello,

IFRS 32 outlines how goodwill is calculated.  It includes the consideration transferred (32.a.i) and the value of any previous minority interest (32.a.iii).

I am not sure what you mean by compensation for restructuring.  But if it’s some kind of discount or cash back, the amount paid would be 1.2m.  If you are obligated to perform a restructuring, the difference would be recognized as a liability (I suppose it may be considered a restructuring provision, but I’d need more details before I could say for sure).

Also, don’t forget to include the amounts paid for the previous, minority interest (paragraphs 41 and 42).

Also do not forget to apply paragraph 13 which requires you to identify and measure all the assets and liabilities of the acquiree including those that the acquiree did not have in its books.

Also do not forget to apply paragraph 18 which requires you measure all the acquiree’s assets liabilities at the acquisition date fair value, not just the book value they have in the acquiree’s books.

Also, since I’m assuming (based on your previous posts) that this acquisition is in the context of a larger holding and that the entities involved are not actually unrelated, do not forget to eliminate all these adjustments (and any goodwill, negative or positive) from the ultimate, consolidated report.

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