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ACCA SBR · Guided practice (Show me how)

Chapter 3: Basic group structures

Impairment of a subsidiary and of an associate

Chapter 3, Example 5 - Subsidiary impairment (full goodwill). Dublin acquired 60% of the equity share capital of Fairyhouse on 1 January 2015 for $20 million. The fair value of the identifiable net assets at that date was $25 million and the fair value of the non-controlling interest was $15 million. Fairyhouse made profits for the year-ended 31 December 2015 of $5 million. Its value in use was calculated as $38 million and its fair value less costs to sell as $36 million.

Chapter 3, Example 6 - Associate impairment. Cork acquired 25% of the equity share capital of Navan on 1 January 2015 for $5 million and exerts significant influence over it. Navan made profits for the year-ended 31 December 2015 of $2 million and did not declare any dividends during the year. Cork impairment tested Navan at the end of the year, whereby the fair value less costs to sell were $16 million and the value in use was $20 million.

All figures are in $m.

  1. Dublin: the impairment of Fairyhouse

    Calculate the impairment in the subsidiary to be recognised in the group financial statements of Dublin as at 31 December 2015.

  2. Dublin: sharing the impairment

    Calculate the impairment charged to the Dublin group retained earnings at 31 December 2015, and state the journal that records the impairment of Fairyhouse.

  3. Cork: the investment in Navan

    Calculate the value of Navan to appear in the Cork group consolidated statement of financial position at 31 December 2015.

Opening this exercise…