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There is a video of me working through Patronic within the Revision Lectures on this site
For the Pamela question, as at 31 December 20×2, there is just one year left – the amount payable as on 1 January 20×4 in 12 months’ time
So 200,000 is discounted for just one year because 2 years have already gone by since date of acquisition
OK?
On 1 Sept 20×7 tyzo co acquired 6 million $1 shares in kono co at $2.00 per share. At that date kono co produced the following interim financial statements.
PPE (note1) $16.0M
Inventories (note 2) $4.0M
Receivables $2.9 M
Cash in hand $1.2M
Trade payables $ 3.2M
Taxation $0.6M
Bank overdraft $ 3.9M
Long term loans $ 4.0 M
Share capital ($1 share) $8.0M
Retained earnings $4.4MNote 1: (PPE)
Gross replacement cost: 28.4M
Net replacement cost(cost less dep) 16.6M
Economic value 18.0M
Net realisable value 8.0MNote 2:
The inventories of kono co which were shown in the interim financial statements are raw materials at cost to kono Co of $4M. They would have cost $4.2M to replace at 1 September 20×7.Note3: on 1 Sept 20×7 tyzo co took a decision to rationalise the group so as to integrate konso CO. The costs of the rationalisation were estimated to total $3.0M and the process was due to start on 1 March 20×8. No provision for these costs has been made in the financial statements given above.
Note 4: it is group policy to recognise NCI at full fair value
Calculate goodwill
Solution
W2 goodwill
Cost of investment $12M
Value of NCI $4.0MPlus
Fair value of s NA @DOA
Share capital $8.0
Pre acquisition reserves $4.4
Fair value adjustments
PPE ($16.6M – $16.0M) $0.6
Inventory ($4.2M- $4.0M) $0.2
($13.2)
————
$2.8
My question what if rationalisation of group would have took place at the date of acquisition or before then what adjustment would have been made to the calculation of goodwill please can you show me working in order to clear my doubts.“Plus
Fair value of s NA @DOA”That surely should be “LESS
Fair value of s NA @DOA”“My question what if rationalisation of group would have took place at the date of acquisition or before then what adjustment would have been made to the calculation of goodwill”
I’m not sure that ANY adjustment would be made to the calculation of goodwill.
The goodwill calculation is to determine the excess of the consideration paid (+ the value of the nci investment) over the fair value of the subsidiary’s assets at date of acquisition
Whatever plans the parent had before, during or after the acquisition should have no affect on the goodwill calculation
Opps yeah, fv if s NA @ DOA will be subtracted
Ohhhk,
then what changes will it bring to the consolidated statement of financial position, if rationalisation of group takes place at the date of acquisition or before.How can an acquiring entity rationalise a group when it doesn’t yet have a group?
“Hmm, I think I’ll just rationalise ABC Limited and then take it over sometime next year”
And the same comment goes for rationalisation ON the date of acquisition
Unaiza, you’re not thinking!
Ohhhhhh yeah you are right how can a parent company could rationalise a group when it havnt formed a group yet
now I got the point
Yeah you were right, wasn’t thinking
Btw
thanks sir 🙂
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