Special Appendix 1

1. Special Appendix 1 Possible New Consolidation Procedures - Goodwill

2. FASB Proposal for Consolidations • The NCI would share in the adjustments to fair value made on the purchase date • Two alternatives • Economic Unit Theory with Full GoodwillAll accounts including goodwill would be adjusted to 100% of fair value • Economic Unit Theory with Goodwill only on Controlling InterestAll accounts, except goodwill, would be adjusted to 100% of fair value. SA #1

3. Adjustments on the D&D Schedule SA #1

4. D&D: Parent Company Concept Price paid $500,000 Interest acquired (80%  400,000) 320,000 Excess of cost over book value 180,000 Building (80%  125,000) 100,000 Goodwill 80,000 SA #1

5. D&D: Economic Unit, Full Goodwill NCI Control Total Price paid $500,000 Interest (80%  400,000) 320,000 Excess 180,000 Building $25,000 100,000 $125,000 Goodwill 20,000 80,000 100,000 Total goodwill: $80,000  80% = $100,000 Total Adjustments: $45,000 $180,000 $225,000 SA #1

6. D&D: Economic Unit, Goodwill Only on Controlling Interest NCI Control Total Price paid $500,000 Interest (80%  400,000) 320,000 Excess 180,000 Building $25,000 100,000 $125,000 Goodwill n/a 80,000 80,000 Total Adjustments: $25,000 $180,000 $205,000 SA #1

7. Worksheet Modifications • NCI equity account added • picks up NCI share of adjustments • used for prior period amortizations applicable to NCI • is extended to NCI column • Amortizations include NCI share of adjustments • Sub IDS picks up amortizations of excess • this allows adjustments to be shared by parent and sub SA #1