chapter 25 – Associate

Thank you for confirming – are you able to let me know if the answer for example 4 Chapter 25 is correct in the notes? I am getting PFY $266million.

Example 4 – Group SPL incl. associate
Helvellyn
$m
Scafell
$m
Revenue 1,645 1,280
Cost of sales (1,205) (990)
Gross profit 440 290
Operating costs (190) (120)
Profit before interest and tax 250 170
Finance costs (55) (30)
Profit before tax 195 140
Taxation (35) (30)
Profit for the year 160 110

The following information is relevant in the preparation of the group financial statements:
On 1 January 2020, Helvellyn acquired 80% of the equity shares of Scafell, a public limited company, for a
cash consideration of $90 million. The fair value of the identifiable net assets acquired was $85 million and
the fair value of the non-controlling interest was $25 million. The fair value of the net assets at acquisition
was not materially different to their book value.
On 1 June 2020 Helvellyn acquired 25% of the equity shares of Armboth and exerted significant influence
through its representation on the board of directors. Armboth’s profits for the year were $200 million.
It is the group policy to measure the non-controlling interest at acquisition at fair value.
During the year, Helvellyn sold goods to Armboth for $40 million at a margin of 20%. At the reporting date
Armboth still held half of the goods in inventory.
Goodwill has been impairment tested at year-end and found there to be no impairment in Scafell but the
investment in Armboth has fallen by $ 1 million.
Assume that profits accrue evenly during the year.
(a) Calculate the goodwill on acquisition of Scafell
(b) Prepare a consolidated statement of profit or loss for the Helvelyn group for the year-ended 31 December 2020