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Another question i’m stuck at. For the following question below, the parent acquired 100% of subsidiary. Therefore, the goodwill will only reflect the parent’s goodwill right ? How do work out from there.
Qn) On 1st october 20X7 the Tingtong company acquired 100% of the Green company when the fair value of net assets was $116million and their carrying amount was $120million.
The consideration transferred comprised $200million in cash transferred at the acquisition date, plus another $60million in cash to be transfered 11 months after the acquisition date if a specified profit target was met by Green. At the acquisition date, there was only a low profitability of the profit target being met, so the fair value of the additional consideration liability was $10million. In the event, the profit target was met and the $60million cash was transfered.
What amount should Tingtong present for goodwill in its statement of consolidated financial position at 31 December 20×8, according to IFRS 3 business combinations ?
Are you sure this is “to be transfered 11 months after the acquisition date” and not 12 months
I presume that this is “only a low probability of the profit target being met” and not “only a low profitability of the profit target being met”
I calculate goodwill to be $200,000,000 + $60,000,000 (I have no information that would let me discount that $60 million) giving a value for the consideration cost of acquisition of $260,000,000
The fair value of net assets acquired is $116,000,000
So Goodwill should be $144,000,000
No. The question states its 11 months not 12 months. And yes you are correct,there was a typo. Its ” only a low probability of the profit target being met”
The answer key states that the answer is 94million.
In which case the answer has taken the $10 million as the fair value of the contingent consideration
I must admit that I’m a little surprised by that but maybe that’s why the time period is 11 months
My (adjusted) answer will read:
fair value of cost of acquisition $200,000,000 + $10,000,000 giving a value for the consideration cost of acquisition of $210,000,000
The fair value of net assets acquired is $116,000,000
So Goodwill should be $94,000,000
OK?
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