11 stands out. With example below. Fins are consolidated.
FLEXPOWER, INC. AND SUBSIDIARY (FKA MONARC CORPORATION) CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2014 AND DECEMBER 31, 2013 (UNAUDITED)
The procedures
10. The practical effects of merger accounting are that:
(a) the net assets of the combining entities or businesses are consolidated using the existing book values from the controlling parties’ perspective (see paragraph 9). The assets and liabilities of the acquired entity or business should be recorded at the book values as stated in the financial statements of the controlling party (i.e. it will require recording of the fair value of the identifiable assets and liabilities of the acquired entity or business at the date of original acquisition from third parties by the controlling party, any remaining goodwill arising on the previous acquisition and minority interests recorded in the consolidated financial statements of the controlling party). When the controlling party does not prepare financial statements, the carrying amounts of the acquired entity are included as if such consolidated financial statements had been prepared;
(b) no amount is recognised as consideration for goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party or parties’ interests; and
(c) comparative amounts in the financial statements are presented using the principles as set out in paragraph 10(a) above as if the entities or businesses had been combined at the previous balance sheet date unless the combining entities or businesses first came under common control at a later date.
11. The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented (ie. including the comparative period) or since the date when the combining entities or businesses first came under the control of the controlling party or parties, where this is a shorter period, regardless of the date of the common control combination. The consolidated income statement also takes into account the profit or loss attributable to the minority interest recorded in the consolidated financial statements of the controlling party.
12. Expenditure incurred in relation to a common control combination that is to be accounted for by using merger accounting is recognised as an expense in the period in which it is incurred. Such expenditure includes professional fees, registration fees, costs of furnishing information to shareholders, and salaries and other expenses involved.
Example below:
On August 17, 2010, Avatech acquired all the outstanding common stock of Rand Worldwide, Inc. (“Rand Worldwide”) in a reverse merger transaction. As a result of this merger and in accordance with US GAAP, the consolidated financial statements represent a continuation of Rand Worldwide and thus include the results of Rand Worldwide for the full quarter ended September 30, 2010 and the results of Avatech from the date of acquisition through September 30, 2010. The balances reported for prior years reflect the accounts of Rand Worldwide only.
