Rule Atlas
FASB ASC 810: A Deep Dive into BAR Consolidations
Under FASB ASC 810 (AICPA / FASB / IRS), a Deep Dive into BAR Consolidations establishes the authoritative rules tested on the CPA Exam. A comprehensive guide to measuring, presenting, and analyzing Noncontrolling Interest (NCI) in business combinations. VoraPrep verifies every threshold, worked table, and practice question below against the current CPA Exam blueprint.
Current Statutory Thresholds & Limits in Effect
Triggers deposit by the next banking day AND converts monthly depositors to semiweekly status for the remainder of the current and entire next calendar year.
Fully Worked Example: A Comprehensive Consolidation
| Component | Amount |
|---|---|
| Consideration Transferred by Parent | $1,600,000 |
| Fair Value of Noncontrolling Interest (20%) | $400,000 |
| Total Implied Fair Value of Sub Co. | $2,000,000 |
| Less: Fair Value of Sub's Net Identifiable Assets | ($1,800,000) |
| Goodwill | $200,000 |
Apex Corp. and Beta Inc. form a joint venture, Nexus Labs LLC, to develop a new technology. Nexus is determined to be a variable interest entity (VIE). Nexus is financed with $200,000 in equity and a $1,800,000 loan from a third-party bank. The loan is guaranteed by Apex Corp. The equity ownership and operational roles are as follows: Apex Corp.: Owns 40% of Nexus's equity and has the exclusive power to direct all research and development activities, which are the activities that most significantly impact Nexus's economic performance. Beta Inc.: Owns 60% of Nexus's equity but has no decision-making authority or role in Nexus's operations. Under FASB ASC 810, which entity is the primary beneficiary of Nexus Labs LLC and is required to consolidate it?
Fully Worked Example: A Comprehensive Consolidation
Scenario: Parent Co. acquires an 80% interest in Sub Co. for $1,600,000 cash on January 1, Year 1. The fair value of the 20% NCI is determined to be $400,000. On this date, Sub Co.'s balance sheet shows assets with a book value of $2,000,000 and liabilities of $400,000 (net book value of $1,600,000). The fair value of Sub Co.'s net identifiable assets is $1,800,000. The $200,000 difference is due to an unrecorded patent with a 10-year life.
- For Year 1, Sub Co. reports net income of $150,000 and declares dividends of $50,000. Additionally, on July 1, Year 1, Parent Co. sold inventory to Sub Co. for $60,000 (a downstream transaction). The inventory cost Parent Co. $40,000. By year-end, Sub Co. had sold 75% of this inventory to outside customers.
- Step 1: Calculate Goodwill and Fair Value Adjustments First, we determine goodwill and identify the amortizable asset.
- | Component | Amount | |---|---| | Consideration Transferred by Parent | $1,600,000 | | Fair Value of Noncontrolling Interest (20%) | $400,000 | | Total Implied Fair Value of Sub Co. | $2,000,000 | | Less: Fair Value of Sub's Net Identifiable Assets| ($1,800,000) | | Goodwill | $200,000 |
- The fair value adjustment is $1,800,000 (Fair Value) - $1,600,000 (Book Value) = $200,000, attributed to the patent. Annual amortization is $200,000 / 10 years = $20,000.
Common CPA Exam Distractors on FASB ASC 810
- 1Use this systematic approach to solve any consolidation problem on the BAR exam.
- 2Step 4. Allocate Income. Multiply the final adjusted subsidiary income from Step 3 by the NCI percentage. This is the 'Net Income Attributable to NCI' for the income statement.
- 3Step 5. Create the NCI Roll-Forward. Calculate the ending NCI balance for the balance sheet: Beginning NCI (fair value at acquisition) + NCI Share of Adjusted Net Income - NCI Share of Dividends = Ending NCI.
- 4A helpful mnemonic for year-end consolidation workpaper entries involving NCI is BIG-I-D-E-A:
- 5Beginning NCI & Sub Equity: Eliminate the beginning balances of Sub's equity accounts and establish the beginning NCI.
Frequently Asked Questions: FASB ASC 810
What is the core rule under FASB ASC 810 (A Deep Dive into BAR Consolidations)?
Under FASB ASC 810 (AICPA / FASB / IRS), a Deep Dive into BAR Consolidations establishes the authoritative rules tested on the CPA Exam. A comprehensive guide to measuring, presenting, and analyzing Noncontrolling Interest (NCI) in business combinations. VoraPrep verifies every threshold, worked table, and practice question below against the current CPA Exam blueprint.
How is FASB ASC 810 tested on the CPA Exam?
Use this systematic approach to solve any consolidation problem on the BAR exam. Step 4. Allocate Income. Multiply the final adjusted subsidiary income from Step 3 by the NCI percentage. This is the 'Net Income Attributable to NCI' for the income statement.
Where can I practice CPA Exam questions on A Deep Dive into BAR Consolidations?
Test yourself instantly with the free playable CPA Exam question on this page, or launch VoraPrep's full CPA Exam adaptive question bank, interactive lessons, and 1:1 exam simulator at voraprep.com/cpa.