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1) Why is contingent consideration added in the calculation of goodwill and recorded in the financial statements when contingencies should not be recognised in the financial statements but only disclosed in the notes?
2) Why is the decrease in contingent consideration treated as other income when the original value of contingent consideration was not recorded by Polestar in the first place?
3) Why is negative goodwill credited to profit or loss instead of debited?
4) Is the profit attributable to the equity holders of the parent simply a balancing figure?
1) Because IFRS 3 says we must
2) But it was accounted for when we calculated goodwill (dr cost of acquisition, cr contingent liability) This is not subsequently adjusted for any re-measurement of the contingency. Any re-measurement is therefore dr contingent liability, cr statement of profit or loss
3) Because it’s a “profit” (we paid less that the share of fair valued assets acquired) and, as a “profit”, it will be credited to profit or loss
4) yes, I suppose so. If we know how much is attributable to the nci, then the balance must be attributable to the members of the parent company
OK?
SIr in Dec 2013question 2, land and building carrying amount (60000-10000) from where we get the 10,000.
and in question 1 goodwill working Immediate cash consideration (6,000*2*75%*1.50) how we get 2.Are the subsidiary’s shares 50 cents each? Then that will explain the *2
I’ll check the question tomorrow when I get better access to the internet
Hi Mike,
Back to q1.
When calculating retained earning, southstar post acquisition should be 6/12*($4600) – 600 = $2,900. But on the answer its $3,000. Can you explain please.
Thank you
It’s actually spelt out for you at the bottom of the income statement in the printed solution!
hello sir. May i ask something in question 1 ,
while calculating the Goodwill you find RE bf 16600 how you figure it out? and after that in RE you mention that pre acq RE are 16300 … I am comfuse with that.
Retained earnings at the end of the year are $12,000 but that’s after taking account of the $4,600 loss for the year so brought forward must have been $16,600
The acquisition took place 6 months into the current year so $2,300 must have been the loss for that first 6 months and the retained earnings at that date must have been $14,300
In addition, there’s a fair value adjustment of $2 million as at date of acquisition, so the figure for serves as at date of acquisition were the above $14,300 plus the $2,000 = $16,300
Ok?
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