Buckfastleigh is a public company with a year end of 31 December 20x6. The company has several subsidiaries, although all goodwill has now been written off.
Requirement
Adjust the spreadsheet for the three transactions listed below. Then compare your answer to the model answer.
| Buckfastleigh | Draft CSFP | Adjustment 1 | Adjustment 2 | Adjustment 3 | Final CSFP |
| CSFP | $m | $m | $m | $m | $m |
| GOODWILL | 0 | 0 | |||
| PPE | 2,000 | 2,000 | |||
| INVESTMENT IN ROYAL CO | 3 | 3 | |||
| INVENTORY | 577 | 577 | |||
| RECEIVABLES | 350 | 350 | |||
| CASH | 60 | 60 | |||
| 2,990 | 0 | 0 | 0 | 2,990 | |
| SHARE CAPITAL ($1 shares) | 100 | 100 | |||
| RETAINED EARNINGS | 2,000 | 2,000 | |||
| OTHER COMPONENTS OF EQUITY | 0 | 0 | |||
| NON-CONTROLLING INTEREST | 50 | 50 | |||
| NON-CURRENT LIABILITIES | 200 | 200 | |||
| CURRENT LIABILITIES | 640 | 640 | |||
| 2,990 | 0 | 0 | 0 | 2,990 |
Transaction 1
Buckfastleigh has owned 30% of the shares of Royal Co for many years. Royal Co was correctly accounted for as an associate. However, on 31 December 20x6, a further 40% of Royal Co was purchased in return for 30m $1 shares of Buckfastleigh, issued at a premium of 50%. This transaction has not been accounted for at all. At 31 December 20x6:
The fair value of 30% of shares of Royal Co was $4m.
The fair value of the net assets of Royal Co was $20m, comprising PPE of $15m and inventory of $5m. NCI is to be measured at a fair value of $4m.
Transaction 2
Buckfastleigh set up a cash-settled share-based pay plan on 1 July 20x6. The vesting period is 4 years, and the fair value of the liability is $8m at 1 July 20x6 and $24m at 31 December 20x6. All of the instruments are expected to vest. This scheme has not yet been accounted for.
Transaction 3
Dartmouth, a 90% subsidiary, has not yet accounted for an impairment to PPE. The CA of the PPE is $20m, and the recoverable amount is $10m.