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Hi there
Am going through ACCA papers for revision and I;m a little confused on the question Hedra Dec 05 I believe.
The question states that the Subsidiary has accepted a $50 million 8% loan not at the date of acquisition from the parent, but when I check the mark scheme it is not part of the purchase consideration.
Also in the question, do you include Revaluation Reserves in the Consolidated Reserves?
This loan note was not issued to shareholders in the parent’s efforts to gain control. IF the acquirer had issued shares, at a premium, plus some cash plus maybe deferred cash to the former shareholders of the subsidiary, all of those would be included in the calculation of goodwill. Additionally, the parent could have issued loan notes to these former shareholders (effectively deferred consideration)
But in Hedra, the loan note was accepted BY THE SUBSIDIARY. It was not given to the former shareholders as part of the price that Hedra had to pay to acquire control. It was a separate issue between the parent and the subsidiary newly-acquired company
OK?
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