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Consolidation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Consolidation

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by MikeLittle.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • December 3, 2017 at 3:37 pm #419969
    Arooba
    Member
    • Topics: 58
    • Replies: 45
    • ☆☆

    At the date of acquisition, the fair values of Latree Co’s assets were equal to their carrying amounts. However, Latree Co operates a mine which requires to be decommissioned in five years’ time. No provision has been made for these decommissioning costs by Latree Co. The present value (discounted at 8%) of the decommissioning is estimated at $4m and will be paid five years from the date of acquisition (the end of the mine’s life).
    PPE 31,500

    Could you tell me how to solve this in the calculation of goodwill?

    December 3, 2017 at 3:51 pm #419974
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23333
    • ☆☆☆☆☆

    We need to include a provision in the calculation of Latree’s fair valued net assets as at the date of acquisition

    We know the present value of the missing provision – it’s $4 million

    So include (as a deduction) that $4 million when calculating those fair valued net assets

    The effect is to increase the figure for goodwill

    OK?

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • The topic ‘Consolidation’ is closed to new replies.

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