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Consolidation 02

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Consolidation 02

  • This topic has 5 replies, 2 voices, and was last updated 9 years ago by MikeLittle.
Viewing 6 posts - 1 through 6 (of 6 total)
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  • May 31, 2016 at 12:22 pm #318390
    Anuja Nair
    Member
    • Topics: 365
    • Replies: 353
    • ☆☆☆☆

    Another question i’m stuck at. For the following question below, the parent acquired 100% of subsidiary. Therefore, the goodwill will only reflect the parent’s goodwill right ? How do work out from there.

    Qn) On 1st october 20X7 the Tingtong company acquired 100% of the Green company when the fair value of net assets was $116million and their carrying amount was $120million.

    The consideration transferred comprised $200million in cash transferred at the acquisition date, plus another $60million in cash to be transfered 11 months after the acquisition date if a specified profit target was met by Green. At the acquisition date, there was only a low profitability of the profit target being met, so the fair value of the additional consideration liability was $10million. In the event, the profit target was met and the $60million cash was transfered.

    What amount should Tingtong present for goodwill in its statement of consolidated financial position at 31 December 20×8, according to IFRS 3 business combinations ?

    May 31, 2016 at 12:31 pm #318395
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23323
    • ☆☆☆☆☆

    Are you sure this is “to be transfered 11 months after the acquisition date” and not 12 months

    I presume that this is “only a low probability of the profit target being met” and not “only a low profitability of the profit target being met”

    I calculate goodwill to be $200,000,000 + $60,000,000 (I have no information that would let me discount that $60 million) giving a value for the consideration cost of acquisition of $260,000,000

    The fair value of net assets acquired is $116,000,000

    So Goodwill should be $144,000,000

    May 31, 2016 at 1:06 pm #318405
    Anuja Nair
    Member
    • Topics: 365
    • Replies: 353
    • ☆☆☆☆

    No. The question states its 11 months not 12 months. And yes you are correct,there was a typo. Its ” only a low probability of the profit target being met”

    The answer key states that the answer is 94million.

    May 31, 2016 at 7:02 pm #318492
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23323
    • ☆☆☆☆☆

    In which case the answer has taken the $10 million as the fair value of the contingent consideration

    I must admit that I’m a little surprised by that but maybe that’s why the time period is 11 months

    My (adjusted) answer will read:

    fair value of cost of acquisition $200,000,000 + $10,000,000 giving a value for the consideration cost of acquisition of $210,000,000

    The fair value of net assets acquired is $116,000,000

    So Goodwill should be $94,000,000

    OK?

    June 4, 2016 at 3:44 am #319218
    Anuja Nair
    Member
    • Topics: 365
    • Replies: 353
    • ☆☆☆☆

    Thank you.

    June 4, 2016 at 4:56 am #319233
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23323
    • ☆☆☆☆☆

    You’re welcome

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