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cash flow statements

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › cash flow statements

  • This topic has 10 replies, 2 voices, and was last updated 12 years ago by MikeLittle.
Viewing 11 posts - 1 through 11 (of 11 total)
  • Author
    Posts
  • November 23, 2012 at 4:30 pm #55631
    topoftherock
    Member
    • Topics: 31
    • Replies: 61
    • ☆☆

    Hi Mike

    please could you explain to me why a deferred tax liability is added on to goowill when working out goodwill for cash flows? many thanks.

    Jocatt dec 2010

    November 23, 2012 at 7:21 pm #108406
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Because in calculating the goodwill and recognising it as an asset, the deferred tax has been separately accounted for?

    November 23, 2012 at 8:07 pm #108407
    topoftherock
    Member
    • Topics: 31
    • Replies: 61
    • ☆☆

    I still dont quite fully understand what you mean sorry.

    November 23, 2012 at 8:21 pm #108408
    topoftherock
    Member
    • Topics: 31
    • Replies: 61
    • ☆☆

    I should be more specific-
    Workings
    (i) Tigret goodwill
    $m
    1 December 2009 – consideration 30
    Fair value of equity interest held before business combination 5
    –––––
    Fair value of consideration 35
    Fair value of non-controlling interest 20
    –––––
    55
    Identifiable net assets (45)
    Deferred tax (45 – 40) x 30% 1·5
    –––––
    Goodwill 11·5
    –––––
    Therefore goodwill is impaired by $68m plus $11·5m minus $48m i.e. $31·5m

    November 23, 2012 at 11:30 pm #108409
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    You lost me when you got to “goodwill is impaired by $68m plus $11·5m minus $48m i.e. $31·5m” Where’s the $68 million from? Am I being stupid here? That looks like a deferred tax asset of 11.5, not a liability

    November 24, 2012 at 12:26 pm #108410
    topoftherock
    Member
    • Topics: 31
    • Replies: 61
    • ☆☆

    sorry about that. so when you get the answer of 11.5 i put it into this working:

    opening balance is 68

    plus the goodwill of 11

    therefore there is an impairment of 31.5 to get to the 48

    closing balance 48

    im confused because im sure the $1.5 million is a deferred tax liability

    in the question it says the fair value of the net assets of tigret was $45 million, and the tax base was $40 million with a tax rate of 30%. i thought if the assets are more than the tax base, then that creates a liability.

    thanks.

    November 24, 2012 at 2:49 pm #108411
    topoftherock
    Member
    • Topics: 31
    • Replies: 61
    • ☆☆

    goodwill of 11.5 sorry not 11

    November 24, 2012 at 3:29 pm #108412
    topoftherock
    Member
    • Topics: 31
    • Replies: 61
    • ☆☆

    i have found the problem now! everything is ok! it was just the way graham holt worded the answer was slightly confusing i.e didnt show that you take off the 1.5 million of deferred tax liability from the net assets.

    November 24, 2012 at 4:37 pm #108414
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Oh, OK

    November 24, 2012 at 5:15 pm #108415
    topoftherock
    Member
    • Topics: 31
    • Replies: 61
    • ☆☆

    thanks for reading through the problem anyway, appreciate it.

    November 25, 2012 at 4:42 pm #108416
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    No worries

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