Hello and welcome to the session. This is Professor Farhad. In this session, we're going to be looking at IFRS 10 and IFRS 3, which deals with business combination, consolidation, goodwill, and non-controlling interests. This topic is covered in an international accounting course and covered on the CPA exam. You need to know the difference between how we impair goodwill for GAP as well as IFRS. As always, I would like to remind you, my listeners, to connect with me on LinkedIn. If you don't have a LinkedIn account, please create one. It's very important for your professional image. YouTube is where I house all my lectures. I have over 1,400 accounting, tax, auditing lectures. If you're benefiting from my lecture, it means somebody else might benefit as well. Please like the lecture, share them, put them in playlists, let the world know about them. This is my Instagram account. This is my Facebook account. I do have some premium account on Gumroad and this is my website. Let's talk about the financial statements of a business combination. What is a business combination? A business combination sometimes referred to as M&A, mergers, and acquisition. It's when one company buys another company. The question will be, why do one company buy another company? Many reasons. There are endless reasons. To enter a new market, for example, I'll give you a simple example, Microsoft. Microsoft wanted to enter the social media world, the social media. So what they did is this. Actually, I didn't think about this. For example, you have Microsoft wanted to enter the social media world. Well, one way to do it is to create their own social media. Well, they didn't do so. What they did is they bought LinkedIn. So now LinkedIn is owned by Microsoft. So this is basically a business combination. So you want to go into a new market and you don't want to start your own company. So you buy an existing company. You build economies of scale. What is economies of scale? When you are producing more, you can combine effort. You can lower cost. That's another way to do it. Or gain access to critical resources such as raw material or technological know-how. There are other reasons as well, but those are the main reasons. Now, you have to understand business combination is a great deal in the real world. The value of business combination was $4.0 trillion in 2015, which is half of it was outside the U.S. 2.3 give or take half and half of it in the U.S. So businesses can combine their operation in a different of ways. How can they do it? Well, the company being acquired, the company being bought in a business combination, can be legally dissolved as a separate entity. So basically the company that you are buying, it will go away. You just kind of eliminate it. Either the acquired company goes out of business and is merged into the acquiring company. So they either go out of business or they merge them with the acquired company. That's one way to acquire a company. Or both company, both parties are legally dissolved and a new company is formed. So you have company A, bought company B, and now they have company C. So basically they created a new company. Or what could happen? One company could gain control over another company by acquiring sufficient number of voting shares, but the acquired company continue as a separate legal existence. So another way to buy a company is to buy their shares. Once you buy their shares, then the majority of their shares, which is more than 50%, then you are in control, but the company stays into existence. In either case, the acquired is the parent company. The parent company is the company that's buying. Buying who? Buying the equiree. The equiree is called the subsidiary. So you have to understand those terminology. We have the parent company and we have the sub. The parent company is the one that's buying the sub. I always give this example. For example, the gap store is the parent company of Old Navy and the parent company of Banana Republic. And I believe they own another third company. I can't think of its name. So the parent company is the company that owns the subsidiary. So the Old Navy is a subsidiary to the gap, to the gap store. So you have to have an acquirer, which is the buyer, and a subsidiary, which is the company that's being bought. Now keep in mind that both companies continue to operate as a separate legal entity. For example, the gap store, they have their own stores, they have their own operation. And the Old Navy store, they have their own operation as well as the Banana Republic. However, because of the parent company controls the subsidiary, accountant worldwide generally require that the subsidiary financial statements must be consolidated with those of the parents. Well, although they're operating separately, they have their separate cash management system. They have their own separate stores. They have their own separate internal control. They're just two separate entities. But when the Old Navy report their financial statements, they get consolidated, combined with the gap store. When the Banana Republic prepared their financial statements, they get combined with the gap store. The term in the international arena is called a group. A group is defined as a parent together with its various subsidiary. Group accounting is a term commonly used outside the U.S. In the U.S. we use the word consolidation. Basically the same concept. Group accounting is when you have a parent company that's combining their accounting with the subsidiaries, with the equiries. So the requirement that parent company consolidate, that's a requirement. All their subsidiaries over which they have exercise control. I want to highlight control because that term is very important. It's going to come important. So what does that mean? It means if you have a control over another company, you have to consolidate that company. Now, what do we mean by control? We're going to define a little bit more control as much as we can. We're going to have a quantitative, and we're going to have qualitative factor. The quantitative factor is going to be straightforward, but we have to be careful. Sometime we might have control without the quantitative factor. So IFRS, this is what we're going to be talking about today, is the primary, which part of today, is the primary international standard governing consolidation and its scope. According to the standard control exists when each of the following conditions are present. When each of the following conditions are present, what are they? First, the investor has power. What is power? Well, it means you have 50% or more of the voting shares over the investing. So think about it. If you own more than 50% of a particular company, you control them. You have more than half of the shares. You can do whatever you want to. You are the majority. The investor has rights to participate in or exposure to the downsize risk from the variable return from its investments with the investing. So simply put, variable return means whatever happened to that company, it's going to affect you somehow. If your cash flow goes up, somehow you are affected. If they incur losses, somehow you are affected. You have a variable interest in that company, a variable return. It's going to vary. Your return will vary up and down with that investing, with that subsidiary. And the investor has the ability to use its power over the investing to affect those returns. And basically, if you can use your power, whatever power you have, and to tell the investor what to do to influence the return, then you have power over the investing. But again, power generally is you have 50% or more. This is basically a quantitative factor. If you have more than 50%, clear cut you are in charge. You need to consolidate. Now let's talk a little bit more about variable return. For simplicity, think of variable return as the varying amount of profit or cash flow to which the parent company may lay claim by virtue of its investments in the subsidiary. So how is your investment affected by the subsidiaries? It's going to vary. That's what the variable return is. So we say the parent might have a variable economic interest or VEI. Now, if you're interested more in VEI about this topic, go to my advanced accounting course. And I have a whole lecture about VEI because of a company called Enron. Enron had many VEI and they did not consolidate them. So if you're interested, you can go there. But this is all mean by variable return. And the reason we use VEI or variable return, it's an overarching concept that can be applied to a wide variety of direct or indirect or implicit control. So basically what we want to do, we want to make sure we capture all sorts of connection between the parent and the subsidiary. Sometimes the connection is direct. They have direct shares in the company. Sometimes they have an indirect ownership. They own someone and that someone owns the subsidiary. So you own the subsidiary but not directly and directly. So that's why we have to be careful. That's why in accounting we use variable return. So that's the issue. So let's talk a little bit more about variable economic interest. So what is the issue with the 50% plus? If it's 50% plus, it's pretty clear cut. But what happened in some circumstances, there's a variety of legal structure and local business convention allow companies to gain effective control over the subsidiaries at lower share ownership threshold. That could be a problem. Also could be another problem is somehow indirectly you own the company but you don't consolidate. I will talk about Enron real very briefly just to kind of show you why we emphasize the word control and why we emphasize the word variable economic interest when it comes to consolidation. Let's talk about Enron. Enron is right here. This is Enron, the main company, Enron. Now Enron needed money. Enron needed money to operate. So they were not doing good. They needed money. So what they would do? Enron would create those subsidiaries. Sub. Sub 1. Sub 2. And here's what would happen. This subsidiary will go out to the bank and will borrow, let's assume, $5 million. Okay? So this subsidiary, subsidiary 2, will debit cash $5 million and they will credit notes payable $5 million. Now this subsidiary, the bank's going to ask the subsidiary, well, what do you do for business? They would say, well, we're part of Enron. The bank will go to Enron and say, yes, this is part of my subsidiary. Lend them the money. I will guarantee their loan. Okay? So this subsidiary borrowed $5 million. Then what happened is this. And this is one of the things that they did. They did many things. And this subsidiary would hire Enron for some, in quote, consulting work. So Enron will do some management or consulting work to the subsidiary and they will charge the subsidiary $5 million. So Enron will debit cash $5 million and they will credit revenue $5 million. So basically the money that the subsidiary, the subsidiary borrowed from the bank became revenue on Enron Box. Now, the story is not done yet because we still have one problem. The problem is the sub is part of Enron. So somehow Enron find a way to not consolidate sub too. So they found legal ways around it. Now, those legal ways don't exist anymore. I'm not going to cover them what they were. But if you're interested, go to my VEI lecture and you just type variable economic interest or go to my advanced accounting. So this is the problem with control. We want to make sure that as long as the parent company, this is the parent company Enron, they have control over the subsidiary. Well, the subsidiary serve to exist Enron. So Enron is the controlling party. But somehow they found a legal way to not consolidate. Therefore, they showed the $5 million as revenue rather than the $5 million as that and they did it in many other places. And what happens sometimes, for example, sub too would borrow money. Then they will buy assets from Enron, assets that were no good, investments that were no good. And Enron would sell them those investments at a profit to book a profit. So this is what we meant by this is the problem with control. We have to make sure we have control. Another example will be Spain's Banco Balboa Bank that bought a bank in Turkey and they only owned 39% in terms of share, around 39%, which is less than 50%. But in reality, they control the bank and some other measures they were able to elect the board of directors that they wanted. So they did have control without the 50%. That's why the percentage is important, but sometimes we have to see who really controls that entity. If you really control that entity, then you need to consolidate that entity. So what do we look for? Other criteria that we look for? The ability to direct the investors and to enter into an agreement that benefit the investor. Well, if you can't tell them, go into this agreement, buy this thing from me because it's in my favor that you buy it. You're controlling the entity. Therefore, it's part of your company. You need to consolidate. If you have the ability to direct operating activities such as selling and purchasing goods and services, you are in control. If you can tell them what to sell and what to buy, then you're in control of the company. If you have the ability to direct your investments such as R&D and capital spending, CAPACs, then you're in control. If you have the ability to determine the investor's financial structure, if you can tell them you should have 30% that, 70% equity, 30% equity, 70% that, then guess what? You're in control of the company. Your parent is in control of the subsidiary. If the investor's right to obtain direct control of the investors by additional voting shares at a later date or in response to a certain triggering event, then you might be in control of the company. So we don't only look at the percentage at 39% to see if there's any control. We have to look at other factors. If somehow we control the company, then guess what? We have to consolidate. Now, how do we consolidate? We use the acquisition method. It's easy. It used to be a little bit more complicated because we used to have more than one method. So the acquisition method, now we use IFRS 3 in 2004, brought the international rules in line with the US standard. So now, whether it's US or international, we use the acquisition method, which is good. It's easy. It's one method. So all combination must be accounted for using the acquisition method. This method required the accountant to designate an acquirer and one or more acquirers. So there's a parent and a subsidiary. An acquirer is the company that's buying the equiries. Microsoft bought LinkedIn. So Microsoft is the acquirer and LinkedIn is the equary. LinkedIn is the equary. The accountant to record the equaries identifiable assets and liability in the post acquisition consolidated financial statements at fair value. This is important. When Microsoft bought LinkedIn, whatever they bought in terms of assets and liabilities, everything is reported at fair market value. Fair market value. Now, this is easy. When we buy something, we have to report everything at fair market value. They're identifiable assets. So if they have cash, well, if they have receivable, inventory, property, plant and equipment, any asset, intangibles, patent, so on and so forth, it's reported at fair value. Now, what happened if we pay too much for the company? And we cannot identify why we bought too much. Then what we have now is we have goodwill. So what is goodwill? Goodwill is the premium amount that you paid above and beyond those identifiable assets. So how is it measured? Let's take a look at how is it measured first. Goodwill is measured. The difference between A, which is the consideration paid, let's assume cash paid, plus non-controlling interest plus NCI. Now, what is NCI? We're going to see what's NCI in a moment. Think of cash. How much you paid cash versus the fair value of the net asset of the company? Let me give you a quick example. Let's assume company is buying company B. Company, rather than A and B, let's assume company one and company two. So company one is buying company two. Company two assets, they have fair market value of 300,000, liabilities of also fair market value of their liabilities is 100,000. And this is fair market value. Assets 300,000 and liabilities 200,000. Well, what we would say is they have a net asset, net assets of 200,000. Let's assume you paid for them and you paid 250,000. You came in and said, I'm going to pay 250,000. Well, you paid $50,000 more than what the company is worth. Well, and guess what? You paid that extra and you did not pay for any specific particular identifiable asset. So this $50,000, you cannot allocate. You cannot say this $50,000 is for a patent or for some intangible asset. You cannot identify, identify. That's why identification is important. You cannot identify which assets you bought. You just wanted to pay more. Maybe because you like the company. I don't know. Maybe because of its location. Something you cannot identify. Well, that extra above and beyond the net asset that you cannot identify with anything is called goodwill. So when A exceeds B, when you pay more than what the fair market value of the asset, you would recognize it as an asset called the goodwill. If you pay less, if you happen to pay less, let us assume it's worth 200,000. You paid 170,000. Guess what? Good for you. You have a bargain purchase. Then you have a gain. In this situation, you have a gain. And we'll work an example. Let me show you an example how this work. So this is a real example. The fair value of Lavage, which is a French company, on the date of the acquisition was 35 million. The fair value of their liabilities were 24.7 million. So the fair value of their net asset is 10.2 million. Now, here comes the Swiss company, Holsen, and they bought them and they paid for them 19.4 million, plus non-controlling interest. Now, what is this non-controlling interest? Will we mention a non-controlling interest? Non-controlling interest, when you don't purchase 100% of the company, let's assume they purchase only 90%. Well, guess what? If they purchase 90%, it means 10%, they don't control because they only bought 90% of the company. That 9% is represented by non-controlling interest. So, what you paid, the Swiss company paid 19 million, plus the value of the non-controlling interest. Now, how do we come up with the value of the non-controlling interest? Just wait a minute. We'll get there. Minus less, the fair value of the net asset will give us 11.6. So the Swiss company paid 11.6 million more, or billion, I believe, more than what the French company is worth. So after they identify all their assets, after they identify all their liabilities at fair market value, they paid extra 11 million. Well, that extra, we cannot identify with anything. It's called goodwill. Now, why did we pay this? We paid premium. There's a reason. There must be a reason why we paid this. Maybe it's their employee, the track of their management tracker, their employee management reputation, location, connection to the government, whatever it is. We don't know what it is, but we don't know. In some time, for no reason. We went into a bidding frenzy with another company, and we kept increasing and increasing our crisis, and this is why we have a goodwill. There's no particular reason. So non-controlling interest, let's talk about non-controlling interest, or NCI represent the percentage of the acquirer shares that the acquirer did not purchase. And here we said that's a sum at 10%. US GAAP required that NCI be measured at fair value at the date of the acquisition, which include the NCI's shares of goodwill. We'll see that in a moment. We'll see how does it work. In contrast, IFRS allows the non-controlling interest to be measured in two ways, either the fair value, like US GAAP, or proportionate method. So the fair value is the same as US GAAP. And if you're interested in US GAAP, go to my intermediate accounting chapter, either 12 or 13, and you can view more about this topic, or the proportionate share method, which is basically the IFRS method. Okay? The difference between those two methods is important to understand, because companies reporting under IFRS commonly choose the proportionate share method. So usually under IFRS, they use the proportionate share method, decision that can result in substantially lower valuation be placed on goodwill. So they'll have less goodwill when you use the proportionate share method. You will see an example. In the example above Holtson, the Swiss company chose the proportionate share method. So when they bought Lavage, they used the proportionate share method. Now, the best way to illustrate this is to actually work an example. So let's take a look at this example. Suppose that George company acquired 90% of Chris's company, and they paid 360,000. So this is how much they paid. Now, when you pay for the company, you have to know what are you paying for? What's the fair market value of the asset and the fair value of the liabilities? The fair value of the identifiable asset, 320. So they identified all the asset and their fair value is 320. Now, some of those identifiable asset may not be on the books, but they could be intangibles pattern that Chris's company did not record on the books. But nevertheless, we can identify them. And the liability assumed by George in this business combination is 40,000. The liabilities are 40,000. So the net asset is how much? The net asset is 280. The difference between fair market value of the asset and the fair market value of the liabilities. If George chooses to measure NCI using the proportionate share method. Now, how would they do it if they use the proportionate shares method? It records goodwill only for its controlling interest. Now, what is its controlling interest? Well, they only control 90%. Let's take a look at it. Well, 320 minus 40 equal to 280. This is the net asset. Now, of this 280, 10% is not ours. So 28,000 is not ours. What's ours is 90%. What's 90%? 90% is 252. So the fair value of George's controlling interest not identifiable asset is 90% of the net asset. The net asset is to 80. 90% of 280 is to 52. Now, remember the NCI interest is 28,000. Remember, we paid 360,000. This is how much we paid minus 252. So the goodwill is 108. We paid 360,000 and what we bought, we bought 252,000. 90% of the fair value of the identifiable asset and net asset, which is fair value of assets minus the fair value of the liability. So this is the proportionate share method. So our goodwill is 108. Let's take a look at the explanation to see how we computed the goodwill. So net identifiable asset 280 times 10%, which is the non-controlling interest. The non-controlled interest is 28,000. Consideration transfers is 380 plus non-controlling interest How did we get the non-controlling interest? We computed above 280 times 10%. This is using the proportionate share method. Remember, we have two alternatives. This is alternative one. So copy these numbers down. You're going to see them again. So 388 minus 280 will give us goodwill of 108. So the ratio transfer plus NCI minus fair value of net identifiable asset. So this is the proportionate share method. Let's look at the fair value method, which is the US cap, the fair value method. It's the accountant must appraise the NCI fair value date on the acquisition date and use this appraisal to estimate the size of the premium that a hypothetical buyer would pay for the remaining 10%. So now what we say is, if we bought 90% of the company, how much is the company worth 100%? So for simplicity, let's take a look at this example. If we paid 360,000 for 90% of the company, it means the company is worth 400,000. How is it worth 400,000? Well, 360 divided by 0.9 is 400,000. So now what we did is we find the value of the company. If we paid 360 for 90%, it means the remaining 10% equal to 40,000. Now, how do I do this computation? Take what you paid divided by the percentage that you bought. So the full value of the company, this is the full value. So if you want to buy the company 100%, based on the value that you paid 360,90%, you've paid 400,000. Hopefully, this is pretty straightforward. This is the full value. If you watch sharp tanks that show on CNBC, that's how they value a company.  I'm going to give you 25% of my company. Well, the first thing they do is they would say, okay, I'm paying you 300,000, divided by 0.25, your company must be worth 1.2 million. Now justify for me why your company is worth 1.2 million. If I'm paying 300,000, 425%. Same concept here. I'm paying 360, 490%. The whole company is worth 400,000. Now under these circumstances, the fair value of NCI would be appraised at 40,000. So NCI now, what's NCI? It's the amount that we did not control. The amount that we did not control is 40,000. Now the goodwill attributed the non-controlling interest. Now the goodwill is 12,000, which is 40,000 minus 10% of 280. What is 280? Well, 280 is 320 minus 40. The fair value of the asset minus the fair value of the liabilities. So the goodwill attributed to the NCI. Now we have goodwill for the NCI is 12,000. It has to be attributed to the NCI. So overall acquisition of Chris would result in a goodwill of 120. 108 of that 120 attributed to the controlling interest and 12,000 contributed to the NCI. Let's take a look at the picture again just to see what it looks like. So we said 400,000 times 10%. This is default. This is the NCI interest. Consideration received is 360 plus 40,000 is 400,000. 400,000 minus 280 is 120. So this is the 120. This is the goodwill. Of this goodwill, 10% goes to NCI and 90% goes to the controlling interest. So this is going to be 12,000. And this is going to be 108. Now let's take a look at when you buy a company at a bargain purchase. Bargain purchase means what? It means you pay less than the fair market value of the net asset. You pay less than the fair market value of the net asset. Assume the same fact except that you paid 240,000 for 90% of the company. Let's take a look at this and see how this worked. Assume the controlling interest is measured using the proportionate share method. So basically, consideration received is 240. Non-controlling interest is 28. So the subtotal is 268 minus the fair value of the net asset 280. You bought, you purchased something for 268. That's on the books, not on the books, fair market value of it. So you paid 268 for something that's worth 280. Guess what? You have a gain on the bargain purchase. You made a profit here. You made a gain. Now we have to remember one more time. Goodwill, what is goodwill? It reflects the acquirer's willingness to pay a premium over the appraised value of the acquirer's identifiable net asset. So goodwill is what you think the company is worth way above and beyond. And this is the most controversial asset recognized in an M&A deal because this is what they fight about. This is what they fight about. Why paying extra more than what you are worth at fair market value? Now here what's going to happen in the real world? Emotions, egos, play a role.  So you're willing to pay more. Or you go into a bidding frenzy with another competitor. You and another competitor bidding and this happens a lot when we have pharmaceutical companies. So what happens is the prices keep on going higher and higher and as the prices go higher, the goodwill is larger. Usually the companies that justify this, they say there's going to be a synergy. We can cut the cost once we bought them. That's why we're paying extra. But what happens is academic research or research post acquisition shows that most of the time companies overpay in many situations. They overpay. Now this is just a little bit of an overview. Now the good news is this, both IFRS and USGAP, it says no amortization for goodwill. So simply put, what does that mean? That means goodwill is considered to have indefinite, unlimited life. So therefore we don't amortize it. Well, guess what? If we don't amortize it, we have to do something else. We have to test it for impairment annually. We have to test it. We must test it annually because we don't amortize it. So now we're going to look at IFRS 3. IFRS 3, impairment testing of goodwill is performed at the level of the cash generating unit. So what they do, they select the unit that they are working with to test goodwill, and they call it the cash generating unit. So how is that defined? It's CGU. It's defined as the smallest group of asset that generate cash. Info that are largely independent from the cash inflow from other units. So basically we're looking at the company from subunits perspective. For example, the Swiss company Halsam allocated goodwill recognizing its acquisition to various geographical location with the largest assigned to the operation in North America is cash generating unit. Nigeria is a cash generating unit. Nigeria is a cash generating unit. And France obviously is a cash generating unit. I say obviously because Navarre was a French company. So they must have their own operation, main operation in France. So this is all made by this. So how do we actually test goodwill impairment? Well, we have to compare the carrying value of the entire cash generation unit, including goodwill attributed to that unit to its recoverable amount. So we're looking at the book value compared to the recoverable amount. Again, how do we measure the recoverable amount? The recoverable amount is the higher of the CGU, the cash generating unit, value and use. Okay, which is the discounted cash flow or the fair value less cost to sell or the higher of these two. How much would you sell it? Minus cost to sell. The higher of these two will be the recoverable amount and you compare this to the carrying amount including the goodwill attributed that carrying amount. Now under US gap, they don't use the cash generating unit. They call it the reporting unit. A little bit differently than the international standard. Again, if you are interested in this, go to my intermediate accounting, okay? So the impairment loss on the CGU is the amount by which the carrying amount, including goodwill, is higher than the recoverable amount. If your book value is higher than your recoverable amount, the difference is goodwill. And what do we do with that difference? Once we have a loss, we'll start to take goodwill out, okay? If controlling interest was originally measured, let's look at this statement first. An impairment loss identified at the CGU level is first applied against goodwill. So once we find we have a loss, the loss goes against goodwill until goodwill goes down to zero. Once goodwill is eliminated, any remaining impairment is allocated to the other asset on a pro-rata basis based on the relative carrying value. Then we'll take the remaining loss from the write down and we allocate them on a pro-rata basis. If non-controlling interest was originally measured at the proportionate share method, which is alternative one, then the carrying value of the entire CGU must be increased by the amount of the goodwill attributed. Don't worry, we're going to work an example to show you what does that mean, okay? Let's go back to George's example. Let's assume George's company, no, let's not assume anything. We should know that they must conduct an impairment test of the goodwill related to the acquisition of Chris. Remember George acquired Chris earlier. The assets of Chris are the smallest group of assets that generate cash flow. So Chris's assets, that's the CGU. They are independent, they have independent cash flow from other unit. The goodwill related to the acquisition will be tested by comparing Chris carrying amount to its recoverable amount. So then look at the carrying amount at the recoverable amount and let's take a look at the data that we are giving. So let's assume the following. The fair value is 280. Cost the sell is 30. So 280 minus 30 is 250. And present value of future cash flow is 270, which is the value in use. Now, those are the recoverable amount. Which one are we going to be using? The higher of the two, which is 270, okay? So assume that George adopted the proportionate share of acquired firms net asset, which is alternative one. Here's how we do the computation. Chris's net asset, carrying amount is 280. Chris's company goodwill, 108. And the NCI is 12, which is in total for the NCI took 12. So in total is 120 for the goodwill. Carrying amount for the whole thing is 388. Carrying amount for the NCI is 12. So adjusted carrying amount is 400,000. So this is the carrying amount. This is the carrying amount of Chris's company, 400,000. Now again, we said we're going to compare 400 to 270 because 270 is the greater of one or two. Then we have impairment loss of 130,000. Now the question becomes, how do you allocate this impairment loss? How do you allocate this impairment loss? Okay. In terms of allocation, here's what's going to happen. 120 will be allocated to goodwill because we have goodwill of 120. We will be allocated to goodwill. The goodwill now is will be shared. Now this 120, what's going to happen will be shared. NCI will take some and the parent company will take the other. NCI will take 10% of this. 10% is 12,000. And what's left is 108. So the parent company will have to write down goodwill by 108,000, which is 90%. And the remainder 12,000 goes to NCI. Okay. And obviously we have 130,000. So 120 is toward the goodwill. What's left is 10,000. The remaining 10,000 will be, will impair assets on a pro-rata basis, other assets on a pro-rata basis. Let's take a look at the example here. So what happened is we have 120. Again, right here. 120, NCI took 12. NCI will absorb 12. Okay. So 108, this 108, zero out the goodwill. Then this 12,000 goes to NCI and what's left is 10,000. This 10,000 reduces other assets. So overall, now the company's carrying amount after the write-down is 200 and 70,000. Now this is the alternative one. Let's look at alternative two. If we're using alternative two, it means we're using the fair value method. We'll do the following. Carrying amount is 280. Goodwill is 120. Again, between 250 and 270, we're going to choose 270. 400 minus 270 equal to 130. How are we going to allocate the 130? Easy. Remember under alternative two, we have 120 of goodwill. So the whole thing, of the 130, the whole thing goes into the parent company goodwill. Okay. The parent goodwill. Okay. And what's left is 10. Anything that's left goes to impairing other assets, impairing other assets. Simply put, we don't allocate anything for the losses to the NCI goodwill. Okay. Now hopefully this makes sense. Hopefully this will help you understand that. That makes sense. Hopefully this helped you understand a little bit more, the concept of writing down goodwill. If you have any questions, any comments, by all means email me. If you're studying for your CPA exams, study hard. If you happen to visit my website for additional lectures, please consider donating. Good luck.


Hello, and welcome to the session in which you would look at the time value of money concept. This topic is extremely important, whether you are an accounting student or a finance student. On the CPA exam, you cannot pass the exam, I can assure you, FAR or BEC, unless you have a good understanding about the time value of money. The reason is simple. When it comes to the FAR section of the exam, there are many accounts such as bonds, notes payable, leases, the third income taxes, account, long term notes receivable. They use this concept and the assumption is, is you have a good understanding of this concept. On BEC, we have the finance section and they expect you to know the time, the concept of the time value of money. So whether you are an accounting student or a CPA candidate, I strongly suggest you have a strong understanding about this topic before sitting for the exam. 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If you haven't done so, take a look at my LinkedIn recommendation. Share this recording. Share it with other. Connect with me on Instagram, Facebook, Twitter and Reddit. The time value of money concept is extremely important. So let's go ahead and dive into it and I'm going to explain it from scratch, from zero. So what is the idea behind the time value of concept? Simply put, a dollar received today is not the same as a dollar promised in the future. Well, what does that mean? It means if you give me a dollar today, that dollar is not the same. If you give me the same dollar a week from today. Now why? It doesn't have to be a week. It could be a month, a year, it doesn't matter. Why that's the case? Well, one reason is inflation. What is inflation? Let's assume rather than a dollar, two dollars. You gave me two dollars. Two dollars today, I can buy, I can still buy easily a cup of coffee from a place called Wawa, okay? Easily buy a cup of coffee. Maybe a year from now, the way inflation is going, where prices are going up, if you gave me the same two dollars, I walk into Wawa, it's the same exact two dollars, I cannot buy the same cup of coffee. Why? Because of inflation, prices went up, I lost my purchasing power. So a dollar today is worth more than a dollar a year from now, or two years from now, or three years from now. So that's what we mean by inflation. The other thing is risk. Well, if you give me the dollar today, I know I have it in my hand. A year from now, you may not exist. I don't know whether you're going to give me that dollar or not. So giving those two factors, inflation and risk, the same dollar is not worth the same. So investors need a way to compare a dollar worth today to a dollar worth into the future. Because if I'm going to invest with you, if I'm going to give you money, whether lend you money or invest money in your company, I need to compare a dollar today to a dollar into the future. I need to compare, what is my dollar worth today?  So my dollar equal to my dollar in the future. So that's what we're trying to do. So what we do is we use something called the present value or discounting or the time value concept. So this is where the time value concept. So if I'm going to give you a dollar today, let's assume I'm the lender, I want to get my money in the future, but I want to have the same principal amount that I gave you. I want to have the same amount. If I'm going to give you a dollar today, I'm going to, I want to receive equal value. How do I compute this? How do I compute it? This is where I would come. This is where I would use the present value or the discounting. Now on accounting, we have many uses of this. For example, when we're measuring the fair value of a company at level three, we use discounted cash flow because we don't have observable market value. So simply put, we're looking at a company and there's no value and we need to value the company today. We need to find the fair value. What we do is we look at their future cash flow. They're going to be making 100,000, 100,000, 100,000 and 100,000. That's what we projected. Then we need to know how much is the value of the company today. What we do is we discount those 100,000 to the present value to find out what's the value of the company using discounted cash flow. When we discount cash flow, this is what we would learn in this chapter. Using interest rate, we discount the value, find the present value. Same concept applies when we deal with long-term liabilities, bonds, leases, notes. They are recorded at the present value of the payments. Same thing with long-term receivable. They are recorded at the present value of the receipts. So these are the uses. That's why you cannot pass the exam without knowing, understanding very well the time value of money, starting with the concept of interest. What is interest? Interest is the cost of money. You want to buy something from the store, you give the money, they give you something in return. You want to buy money? That's fine. They will give you the money, but you have to pay them interest for that. So if you borrowed $10,000, which we call the principal amount from your bank, and you repaid $10,500 a year later, the difference between the principal, the difference between what you borrowed, called the principal, we're going to say P, and the amount repaid, the $10,500 is $500, and we call this interest. So $500 is the difference, and $500 is the interest. Now we can express the interest as a percentage. So if you paid $500 for borrowing $10,500 divided by $10,000, we can say that your interest is 10, a 5%. Now how do banks determine that interest? How do they say we're going to charge you five interests? Well it depends on two factors, usually, your risk, how risky are you? I'm going to give you this money. Well if you're too risky, I mean I'll give you anything altogether. But what is your level of risk? Now for individuals, that is reflected in your credit, in your credit score, each one of us has a credit score, and companies they also have what's called ratings. So it depends on your rating, on your risk. The higher your risk, the higher the interest rate, because they want to be compensated.  If I want to be compensated for my risk, I'm going to charge you higher interest rate. The second factor is time. The longer I'm lending you this money for, the higher interest rate I'm going to be charging you. So simply put, higher rate, if I charge you higher rate, you're going to have higher interest payment, higher interest cost. If the amount is larger, given everything else is equal, you're going to pay more interest. The longer time it takes to repay that loan, the larger is the interest amount. So make sure you know the relationship between those three. Basically, if they're common sense, if I charge you higher interest rate, you're going to pay more in interest. If the amount that you borrowed is larger, you're going to pay a larger amount of interest, giving the same interest rate. And the longer the loan, the more interest you will pay. Let's dive a little deeper into the interest. And we're going to say we have two types of interests. We have simple interest and we have compound interest. And it's very important that you understand the difference between those two. Simple interest is computed on principle only. Remember, we have a principle and we have interest. It's only computed on principle only. And here's the formula for it. Interest equal to the principle, which is what we borrowed times the interest rate or what we invested. It doesn't matter whether we borrowed or we invested times time. So p times i times n. To remember the formula interest, it's pin. Your pin for your debit card, right? Pin for your debit card. So if you borrowed $10,000 for three years at 5%, here's what's going to happen. Time is three, period is three. The interest rate is five. The principle is 10. If we use pin, 10,000 times 5%, times three will equal to 10,000 or 1,500. If you borrowed now $10,000 for three months, so notice the difference for only three months, not three years at 5%, you have to be careful with the time. Now we have to prorate the time. We have 10,000 times 5%. The time is not three. The time is three divided by 12. I did this on purpose to kind of show you, you multiply it by three divided by 12. What do I mean by three divided by 12? Three divided by 12, it means I have three out of 12 months in the year. Therefore, three divided by 12 is the proper time, not three. So be careful whether you are giving a yearly or less than a year. Always if the interest rate is for less than a year, it will be prorated just like this one. For example, if it's six months, six out of three, 60, six out of 12. If it's daily, for example, if it's for 40 days, you divided 40 divided by 365, if you are told to use 360, you would use 360. So simply put, the simple interest rate here is we took 10,000 times 5%, 10,000 times 5%, 10,000 times 5%, so we only use the principal amount and we earned in total 1,500 and the bank paid 1,500 if you're going to look at it from a bank perspective. Compounding interest is different. Compounding interest is when you would compute the interest on both the principal and the interest and we're assuming here the interest is not taken out. It means the interest stayed at the bank like a CD and will compound interest where you don't take the money out, you don't withdraw it. And for our purposes in intermediate accounting or any other course, the assumption is it's compounded, it's not taken out, okay? So let's take a look now at this $10,000 if it's compounded, the same $10,000 that we invested for three years. Here's what's going to happen. The first year, it's going to earn 5%. It's going to earn $500. We're going to have at the end of the year, $10,500. The second year, we're going to start with $10,500 because we did not take the money out and this is the idea of compounding. It's going to earn 5%. We're going to earn $525. Again, we're going to keep this money and we're going to add the $525 to the $10,500. Now we have $11,025. We're going to take this $11,025 multiplied by 5%. We're going to have $551.25. We're going to add this amount to the principal and we're going to have now $11,576 and to be specific, 25 pennies. In total, we earned $1,576, which is how much more? Which is $76.25 more than the simple interest. Now you're talking it's not that much of a difference in a three-year period. But if you take those numbers and add zeros to them, then you're talking in millions and billions in terms of interest and this is how you should be thinking about. Now there is a formula to compute the compound rate and it goes something like this. 1 plus i raised to the nth power, which is to come up with the future value factor for any particular period at i interest rate. For example, here, if we want to use our example, 1 plus, which is 1 plus, our interest rate is 0.05. And if you want to compute this for three years, because we'll go up to three years, because think about it. If you're computing compounding, you don't want to keep adding the principal, adding the interest to the principal, it takes a long time. Therefore, what you can do is you can use this formula and basically we're going to take 1.05 raised to the third tower. And that's going to give us 1.157.625 if we multiply this by $10,000. And we know that we would receiving 11,576, which is how much we would receive for this loan. Let me keep the calculator up because we will need it anyway. So let's see. Yeah, we'll need it. So for example, if you want to do this computation for five years, 1.05 raised to the fifth power in five years, you multiply it by $10,000. And you will have $12,762, so on and so forth. So this is how you will compute the compounding rate. Let's talk more about the compound interest. Well, interest is expressed in terms of annual rate. So they would say the interest is 10%. But the period doesn't have to be a year. So although they tell you it's 10%, but the compounding can occur less than a year. Remember, compounding is when you earn interest on the interest in the principal on both. And what happened is you can compound the interest throughout the year. When that happens, you have to convert the annual rate into a compounding rate. And how do you do that? You will take the annual rate and you'll divide it by the number of periods. And you have to determine the proper number of periods. Now, because you have the period is less than a year, you will take the number of periods times the compounding period. Let's take a look at an example to illustrate this concept. Let's assume we invested this $10,000 at 5% compounded semiannually. Remember the $10,000 earned us $500 in the prior example. Now it's compounded semiannually. It means we have two periods. Why? Because the year have two periods semiannually, two, six months. And the rate now, we're going to divide the rate by two. So annual rate divided by the number of period. The number of period is two. It's 2.5%. The number of periods, which is one year times two equal to two, two compounding period. Therefore, here's what's going to happen. We're going to have this money. We're going to start with $10,000. The first six months, it's going to earn $250. After a six month later, we're going to have $10,250. And this $10,250, it's going to earn, again, 5%. And it's going to earn $256.26. So notice, if we add them up, it's going to add up to $506.26. It's more than the $500 if the interest was compounded only once. So here's how we convert. If you are told a 12% compounded over five years, if the interest rate is compounded annually, the period is five, five years, interest rate is 12%. Why? Because it's compounded annually. If you are told 12% over five years compounded semi-annually, the interest rate is not 12, the interest rate is 6%. Why? Because you have to divide it by two. So the interest rate 12 divided by two semi-annually. And the number of periods, we have five years, but we have two periods. And each year, the period equal to 10. If you are told the interest rate is compounded for this example, semi-annually, sorry, quarterly, 12 divided by four, the interest rate is three. And quarterly, we have four quarters in a year times five years and equal to 20. If you are told it's monthly, well, monthly means the interest rate is one, because 12% divided by 12 equal to 1%, divided by 12 month. And we have 12 month in a year times five years equal to 60. So you have to be very careful adjusting I and adjusting N when you are doing this computation. This is very important. I just want to make sure I emphasize this enough. You have to know how to do those computation. You have to know how to do this. Now, notice the interest rate is $506, which is more than the $500. So you would earn more. The more it's compounded, the better off you are. Now, we can compute what you actually earned.  So notice, we call this 5.06 is the effective rate. You effectively earned not $5, not 5%, you effectively earned 5.06. So the 5% that we quoted invested at compounded semi-annually is called the nominal or the stated rate, but you effectively earned 5.06. Now, the more the compound occur, the higher is your return. The higher is the effective rate. And to compute the effective rate, basically you will take 1 plus i raised to the N tower minus 1. So let's assume we're going to go back to this $10,000 investment. How can we compute this? Well, if it's compounded annually, easy, 10,000 times 10%. Now, what happened if it's compounded semi-annually? Well, let's find the effective interest rate using this formula. Now, this is how we compute the effective interest rate. 1 plus, they have to be careful, the interest rate here has to be adjusted. Rather than 10%, it's going to be 5%. So it's going to be 0.05 because it's semi-annually equal to 1.05 raised to the second power minus 1 will give us 0.1025. That means you would earn 10.25%, 10.25%. So you will earn rather than 1,000. If you invested $10,000, if the compounding was semi-annually, the effective rate is 10.25. Therefore, you will earn rather than 1,000. You will earn 1,025. Let's assume it is compounded quarterly. So the rate is 10% but compounded quarterly. Well, compounded quarterly means what? Well, quarterly it means four times a year. If we take 10% divided by 4, it's going to be 2.5. So the interest rate that we're going to be using 2.5. So let's do this computation. 1.025, 1 plus the i raised, we're going to raise this to the number of periods. Quarterly means four periods, minus 1. And that's going to give us 10.38, which is 10.38%. 10.38% will give you a return of 1,038. Notice the more this money is compounded. So on a timeline, it looks something like this. This is what we're saying on a timeline. If it's compounded annually, it's only one period. If it's compounded semi-annually, it means you earn the interest for this period. You stop, you add the interest to the principle, then you will earn the more interest on both the original principle and the interest. If it's compounded quarterly, 1, 2, 1, 2. So 1, 2, 3, 4. So after 1 quarter, you would stop, earn the interest, add it to the principle, and earn interest on the principle and the interest. Quarterly 2, you would stop. The second quarter, you do the same thing. You will add the interest to the previous interest and at the principle, so on and so forth. And that's why you will earn more. Now, if this was compounded monthly, we could also do it monthly, same thing. It's gonna be monthly 10.47, 10.47% which is you will earn 1,047 dollars. Actually, you can compute this daily. If you want daily, you would earn an effective rate of 10.52 and you will earn in total 1,052 dollars. Again, very important to understand. The more it compounded, the more, if you are investing, the more is the return, but if you are paying, for example, if you have a credit card and it's most credit cards, they compound daily, it means every day that goes by, the interest added to the interest and they compute the interest based on the previous interest, so on and so forth. And that's why it becomes fit, it becomes quickly, it goes quickly out of control. So this is the compound interest, simple versus compound, compound interest. This is important, this is important stuff that you will need to know for the CPA exam as well as for your intermediate accounting course.  I'm a useful addition to that course. I can help you understand the material better in a different way. Your risk with me is one month of subscription. That's all what your risk is. You pass your CPA exam once in your lifetime. Invest in yourself, study hard, good luck and stay safe.


guys subscribe and turn notifications on leave a like and drop a comment down below get here first and win giveaway calls i will pin as first comment on some of my videos be fast and good luck what is going on guys welcome back to the channel and i appreciate you being here today i bring you another destiny 2 video and today i bring you this top five luckiest moments which consists of insane luck regarding loot drops and super lucky pvp plays and before we get into the video guys if you do enjoy leaving a like really helps me in the channel out and if you're new around here be sure to subscribe also guys if you have any amazing clips to send in epic plays funny reactions lucky loot drops fails anything of that kind send them into the email just link to the top of the video description it's simple and quick and easy to send them in just follow the rules on screen now so let's get into this top five and at number five we have a clip sent by laser who sends in this amazing seventh column clip some will call this a lot some will call it skill in at number four we have a clip sent in by the lighting all two one four man i wish ever versus this kind to me damn at number three we have a clip sent in by i get so lucky no shit you get lucky check this out people thank you commander we're always here to help we have a clip sent in by basim who hits the first i've seen so far a filthy triple collat his dream link can be found within the video description if you want to check him out in at number one we have a clip sent by dunca so this guy gets four exotics in two minutes i am absolutely done and guys that is the end of this top five if you enjoyed it leaving a like truly helps out if you have any amazing clips to send in send them into the email just linked at the top of the video description everybody who has submitted for today's video links to their channel social media sites twitches whatever can be found within the video description but guys thanks as always for stopping by and hopefully i will see you on that next one


preview show of the week where BBC radio show that's Chris Temple is actually alongside me as we look ahead to Sunday's game at Vitality Stadium. Here's what's coming up. We'll start back at Wednesday night and that's the week at the Etihad before moving on to the weekend and that game against Southampton. Well let's start back in the week and that game against Manchester City. Chris it wasn't quite the result that we wanted but what a fight, what determination from the Terries? Yeah it was everything but the result wasn't that I mean unfortunately at the stage of the season good performances don't keep you in the Premier League you've got to get something for those performances but I mean I don't think anybody expected Bournemouth even with the recent resurgence and started to get things turning in the right direction I don't really think anybody would have you know right from the expected Bournemouth to go there and call City that many problems. Yes you might get a few chances because you know City focus might be elsewhere and they changed a few players so you're thinking okay well if you get a couple of good chances you've got to try and take one. 14 shots and that it was a great start that someone came up with after the game that's the most shots any team has had at City since Pep Guardiola took over which is a great feather in Bournemouth's cap of course it counts for absolutely nothing. Unfortunately this is in the fight to stay in the Premier League because you don't get points for you know sort of little markers like that but they were so close to getting something I think they'll be kicking themselves they haven't because I don't think they'll get a better opportunity to get something off City than that. Obviously he rotated a few players City when Sterling came on at the start of the second half he thought well again that's probably a marker with respect to Bournemouth that City aren't happy Pep's not happy with how it's going. Sterling didn't really get one or two little flurries but he certainly didn't affect the game in the way that he has before because Bournemouth were on the front foot for quite a lot of it and City were penned back. I thought the rotations that Eddie Howe made in the team selection before the game were sensible putting in some fresh legs and also saving some legs for for Sunday as well. He seemed to make the subs at the right time. Callum Wilson and David Brooks came on and had a superb impact obviously linking up for the goal. Callum should have scored he should have scored at least one probably the right footed shot that sort of bounced his way past the post he'll be looking out on his stronger foot and thinking that needs to go in. There's other couple of blocks in there Harry Wilson had a shot blocked in me as well Dom Selanke in the first half and the you know the millimetres offside Joshua King so you know so many little moments that you look back on and think oh it could have been but saying all of that again it's if you can't win then take as many positives as you can because it wasn't the last game of the season it wasn't you know do or die it has once again a bit like Leicester been a bit of a springboard hopefully for these last two games. And City scored so early on I think it was the fifth minute and you know you think you know you know not not the perfect start not not what Eddie Howe would have wanted but as you say they didn't sit back 14 shots the most of any away team at the Etihad on the Guardiola and they also limited City to I think the fewest shots at the Etihad on the Guardiola so even if the result wasn't there Eddie Howe would be pleased with those stats going forward. And you have to look at those City goals and say they're two moments of magic I mean it's a brilliant free kick from David Silver I mean Ramsdale was not having a lot of luck at the moment because people keep knocking free kicks into the top bin that one grazed off the underside of the bar I didn't have much of a chance with it but so early on in the game as well you're thinking oh here we go again I'm sure Cherry's fans were thinking and then of course the mindset for probably for those outside becomes damaged limitation immediately when you can see it after five minutes and most people before the game were saying we'd like to come away with a two-nil defeat that'd be great in terms of goal difference and how important that could be. Jezus you know that came from nothing a little step over and suddenly he's put it in the corner and that before half time is you know a long way back for the Cherries there to be too behind but to be fair it came out you know firing in the second half obviously unfortunately didn't manage to get the goal till it was probably just a little bit too late but again even that goal in defeat from David Brooks we see how tight the goal difference is now that could well be crucial. And in terms of fine margins we saw Junior Salas free kick Edison superbly saved onto the post if that rebounds back off his head it goes in if it goes anywhere someone can get a rebound and then Joshua King in the second half up the other end of the pitch that offside decision it could not have been any closer could it? Yeah I mean the free kick was a great save from Edison I mean you're right if the luck's completely turned I mean it has turned a little bit but if it's completely turned then yes Joshua King is two millimetres onside instead of off and that does go in off the back of Edison's head into the net rather than wobbling past the post so yeah two moments that just fell the wrong side and what would have had a few of those this season I mean just you know look at back a couple of weeks to the Joshua King you know handling the ball into the net against Spurs which would have been the winner so there's been a couple of moments that could have been decisive but who knows as you say if those goals go in at that point in the game and how much different things are being may well have spurred city into action who knows but you know the fact they opted not to bring De Bruyne on was probably quite helpful to to Bournemouth's cause as well but yeah all in all to package it up I think they'll be kicking themselves they haven't got anything from it but it was as good as it could have been in defeat. Talking of Joshua King's hand ball a couple of weeks ago there was one there was one on Wednesday night David Silver it looked like the ball hit his hand in the box what was your view on that one? Well I divided a bit of opinion on Twitter with this one because I didn't see it at the time really I didn't really see a replay at the time there were some appeals from Bournemouth players and of course everyone says oh VAI didn't check it well they check everything they're watching everything as the game goes on what they didn't do was stop the game I think it needs to be given some further detailed examination or you know heaven behold that the ref goes over and looks at the monitor I saw the first I saw of it really in detail was a grainy clip that someone sent me on Twitter and I still think it's debatable one of the cherry's analysts sent me a different angle from behind the goal where it looks a little bit more like it should be a penalty my argument would be that David Silver yes his arms up it's close to that it's close to his shoulder somewhere like this but he's expecting the guys in front of him to head the ball Phil Billing I think was one of them a couple of the other one was they jump and miss it he's only a couple of yards behind them he's sort of got his hand up pre-empting the ball maybe coming over or flicking off them I think his hand's already there I don't think he's moved it towards the ball and if anything I think the ball hits him if he doesn't hit his hand and it didn't fall it didn't impede a cherry's player because there were city's players behind so my personal view was I can see why they didn't look at it any further I can also see why on the basis of some of the other ones that have been given this season we go back to Adam Smith Burnley and a couple of other ones that maybe you know the standards are varying but for me I think it probably earned on the side of not being a penalty but I know people will be most of the replies I've had think I'm talking nonsense which is what people think most of us are anyway and just finally on on city always going to be a tough ask to go there the game's now out the way they can focus on again we'll come onto it in a minute but a really big game this weekend and the last two games this season now yeah of course and when you see City on your fixed list and you've gone to United and you see five go into your net and goal difference could be a factor then yeah you're looking and thinking well I mean it's going to be hard to get anything but the one thing you don't want to do is take a panning because confidence wise it could knock the spirit out of you it'll have a bad effect on the goal difference column as well so I think yeah from that point of view it goes down as a good day at the office as best it can be when you lose a game I mean it sounds preposterous as ever to say it's great to lose a game because Eddie won't have seen it like that he'll be you know he'll have been kicking himself they didn't get something from it so yes plenty of positives to take but of course go back to what I said right at the start unfortunately positives don't keep you in the Premier League points do points certainly do and next up where the cherries will be trying to get three points this back game on Sunday against Southampton any how's been previewing that one in his pre-match press conference? Adam Smith we'll make a late decision in on he's felt better Chris Meppleman, Charlie Daniels, Simon Francis as I said Nathan will probably all be out our last two home games have been very good so you look back at the Tottenham game and I think it's very much approached the game in the same the same manner that's both tactically and physically and mentally been really really pleased with our with our last two home performances that got us four points and we know Southampton I got a lot of time for for what they've done this season it's been an incredible turnaround they're trying to rotate the team as much as we can while keeping the strength of the team the most impressive thing I think about Danny is of course he's a an outstanding player technically he's very good plays with real intelligence the way he's come back from his his disappointment you know the injury setbacks he's had the way that he's fought back and kept his mental strength has been hugely impressive confidence levels have definitely shifted upwards as we've gone on through lockdown I've got no idea what it will take all we can do is try and win our two games and hope that that's good enough well that was Eddie Howe speaking on Friday morning in his pre-match press conference now Chris before we talk too much about that Southampton game on Sunday West Ham played Watford they've they've got themselves a 3-1 win talk us through the situation now great result for Bournemouth brilliant I mean the best result would have been West Ham adding a few more and not conceding of course but if you'd have offered Cherries fans 3-1 West Ham win before that game on Friday night absolutely West Ham had to win it from Bournemouth's point of view dented the Watford goal difference to some extent now that it's only two goals difference between the two as well as the three points of course in the points column so yes I've got to admit once Watford scored that goal early in the second half I was getting a little bit on edge that they were starting to dominate the game and could well come back to get something but thankfully West Ham managed to to stabilise things a little bit so that was a huge result for Bournemouth I think you know looking I mean Watford in the first half were dreadful so you're just hoping now that they've got those two very tough games City at home on Tuesday night and Arsenal of course away on the last game of the season and that result means now the difference means that Bournemouth could win one of the last two games and we said this last week when we were looking ahead to what might happen in the West Ham Watford game Bournemouth could win one of the last two games and stay up they could afford to lose one of the last two games now I think if Watford of course lose both of theirs and because the goal difference now if Bournemouth win a game and Watford lose a game the goal difference is going to swing one the other way isn't it it's going to be cancelled out so yeah to in a nutshell that West Ham Watford game went pretty much perfectly for the Chairs and it's a huge opportunity now for Eddie Howell and the side to go out on Sunday make a statement so you can get the win it puts the pressure on Watford and as you say is that Manchester City game next that as we've seen is not easy for anyone well the carrot there now is that by you can pretty much almost get it back in your own hands can't you because if you win on Sunday albeit West Ham Watford will still have a game to play but Bournemouth could climb out of the bottom three with a two-goal win over Southampton again easier said than done Southampton have been playing brilliantly particularly away from home but a two-goal win over Southampton on Sunday would see Bournemouth climb out of the bottom three because they've scored more goals than Watford and of course goal difference the next divider is goal scored so Chairs are ahead in that regard and that's probably unlikely to swing in Watford's favor that particular column so if it really does get tight Bournemouth have the edge on that one so yeah it's a huge motivation for the Chairs to say right let's actually get ourselves out of the bottom three we've been in there since Christmas when they had that wretched run of course themselves went to West Ham I think of that game that that started this year New Year's Day 2020 at the London Stadium a dreadful four-nil defeat and you think of now that they're in the fight still West Ham have obviously been a bit up and down since then as well so yeah this is a big motivation I think it will be a great game because Southampton they certainly won't want a double done over them Bournemouth haven't done a double over Southampton in the league and obviously played them off the park earlier in the season at St Mary's St's got back in the game with a penalty of course and then a little bit of a catastrophe at the end so Callan Wilson roll it into the net to send the away fans into jubilation no such fans to give it a bit of a local neighborhood edge if you like this time so I guess for Bournemouth I'm not sure how much it will feel like a local Derby and I know that phrase you know divides people as well because as a home team you're turning up to your home ground there's nothing about it apart from a bit of familiarity with some of the opposition players that makes it a Derby really for Southampton getting on a coach and traveling half an hour that probably makes it a Derby for them and that will wake them up to the fact that it's a local game but it's just it's the next game for Bournemouth it is a tough one I'd rather be playing Southampton than Manchester City and needing to get something out of the game let's put it that way I'd rather have Bournemouth fixtures than Watford's but Saints have been very good away from home they're nearly on a record breaking points total away from home and of course this lad called Danny Ings who I mean there's a story to be written isn't there I'm thought I mean there is if you're looking for a sort of Southampton perspective or a romantic perspective that Danny Ings the man who Eddie Howe's not saved from the scrappy but certainly when he was a youth team where he had a bad injury time Eddie Howe was manager he gave him a professional contract gave him his debut at the age of 17 against Northampton and the EFL trophy way back in 2009 then took him to Burnley of course for a million pounds had a bit of faith in him when people at Burnley were probably saying you know about this Ingsland we haven't seen too much of him at Bournemouth and here he is maybe playing a role in possibly dumping his old club out of the Premier League he's had a great season great to see him have a run of games where he's been fit as well because he's had such bad luck with injuries he's a great lad he's popular with Bournemouth with fans still I'm sure because of you know he is a homegrown talent that's gone on to be great so yeah I'm just hoping he doesn't have too big a role to play on Sunday. As you say Southampton their form has been superb since the restart you know that that went over Man City at home and then obviously going to Old Trafford and getting that last minute equaliser they've been they've been in some serious form haven't they? Yeah it's taken them a while I mean Ralph Harzler Hootle to be fair he's probably benefiting now and Eddie said this in his press conference that you know he's probably benefiting now from the fact he has settled in a bit and he's managed to instill his ways of working because Southampton have turned over so many managers in the last six or seven years that you know everyone comes in with their own style I know they like to play the Southampton way I'm using my magic inverted converse again but the Southampton way which they have this little black book which has everything in it apparently but Harzler Hootle's done things a bit differently his team work really really hard and that's going to be the one thing Bournemouth will have to overcome is the work rate of the organisation that the Southampton have not in the same way as you know Palace and Wolves and Newcastle that it's you know not the most attractive football they don't sit with just two lines of four because you know Danny Ings gets a lot of service and they do break quickly so it's going to be two good teams Southampton as I say we want to want to not sit back and just roll over for Bournemouth they want to get some local pride back I'm sure and finish on a high and a couple of million pounds per place in the Premier League as well so if they can note themselves up a place I'm sure they'd be pretty happy with that but yeah it's not as not as easy a game was maybe people would look at mid-table and think oh Southampton in mid-table because since lockdown as you say apart from the Aston defeat a great draw at Man United a win over City a couple of other really good away performances they tonk Norwich the tonk Watford away so yeah it's going to be it's going to be tough but I think with the way Bournemouth have been bubbling up in the last three or four games I think they should definitely go into it with confidence and in terms of Bournemouth injury he's only house head this morning Nathan Akko won't make it there's a chance for next week but he won't he won't make it with a Southampton game and Adam Smith are going to have to make a late call and obviously still suffering from concussion from that spares game so again just like last week plenty of options available to him yeah I wouldn't change the back four I'd keep Jack Stacey and even if Adam Smith is fighting fit hasn't had a great post lockdown Adam Smith I think Jack Stacey's done nothing wrong in the face of today yeah he's had a couple of moments of course he's been up against world-class opposition it's his first season in the Premier League so there'll be moments but I think his energy up and down will be crucial in a game like this because it may well swing end to end I think certainly the work rate is going to be the key so I would have Stacey in definitely I'd definitely have Stanislaus in on the left hand side I think he was been rotated carefully in the last couple of games Brooks I'm sure will come back in because even in that little comment about how long he played maybe 20-25 minutes at at City I mean he looked he looked to threat as well so again one who's just been chipping away more and more minutes and seems to be getting a bit of that rustiness out of his system of course the season's going to win too early for him probably just he's getting back going although there may be a quick turnaround into the new season so hopefully he can retain that whichever division form of arena if he stays but yeah Brooks in Stanislaus in Callum Wilson in which does provide a headache up front because Dom Selenki's been excellent the last two games as well I just wonder if Joshua King might be the one squeezed out because I think you have Callum Wilson and your team if he's fit and 100% and I think that's the reason he was left out the other day is to save him for this game and to have some fresh legs up top for that Man City game so I wouldn't be surprised if Joshua King got squeezed out and he went Selenki and Callum Wilson for this game well we'll have to wait and see it's a huge game out by Paddy Stanislaus on Sunday and Chris will be there with Willow and you can listen to live free commentary on AFCB TV we'll be back next week to preview that final game we've seen against Everton