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BPP Revision kit – GW on acquisition

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › BPP Revision kit – GW on acquisition

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 28, 2021 at 1:45 pm #622040
    mklymenko
    • Topics: 3
    • Replies: 15
    • ☆

    Hi,

    There is a question in BPP I would need some explanation about.

    C Co acquired 70% of B Co’s 100K $1 ordinary shares for $800K when the RE of B Co were $570K.

    B Co also has an internally generated customer list which has been valued at $90K. The NCI in B Co has a FV of $220K at the date of acquisition.

    What was the goodwill arising on acquisition?

    The answer given in the book is $350K, i.e.:

    Consideration transferred 800
    NCI @ acquisition 220
    Net Assets (RE + Shares) 670
    Goodwill 350

    Why the customer lists FV is not included in the net assets of the acquired entity? It is an identifiable asset, it has a valuation (cost can be measured) and we could expect future economic benefits.

    It was my understanding, that if it was e.g. a brand value instead we would include it into total of net assets as identified and measured intangible, why is it different for customer lists?

    Thanks a lot in advance!

    May 29, 2021 at 7:48 am #622104
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    Hi,

    The customer list can be capitalised as part of a business combination, so would be included within the net assets acquired. Is there something additional in the question that highlights why it might not be?

    Thanks

    May 29, 2021 at 1:45 pm #622182
    mklymenko
    • Topics: 3
    • Replies: 15
    • ☆

    Hi,

    Thanks for reply!

    No, the whole question as in the book is right there.

    So then it must be an ommission in the answers bank of the book

    May 31, 2021 at 7:27 pm #622491
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    If there is not anything else in there highlighting why it should not be included then there is something wrong with the question.

    I don’t recall seeing this as part of a section C question in any recent exams so I’d not worry too much about it.

    Thanks

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