Highveldt Bpp

Dear Tutor, I am having difficulties with the 2 additional information as below How was the accounting treatment for that 2 addtional information? Highveldt, a public listed company, acquired 75% of Samson’s ordinary shares on 1 April 20X4. Highveldt paid an immediate Rs.3·50 per share in cash and agreed to pay a further amount of Rs.108 million on 1 April 20X5. Highveldt’s cost of capital is 8% per annum. Highveldt has only recorded the cash consideration of Rs.3·50 per share. The summarised statements of financial position of the two companies at 31 March 20X5 are shown below: Highveldt Samson $million $million Tangible non-current assets (note (i)) 420 320 Development costs (note (iv)) Nil 40 Investments (note (ii)) 300 20 Total NCA 720 380 Current assets 133 91 Total assets 853 471 Equity and liabilities Ordinary shares of Rs.1 each 270 80 Share premium 80 40 Revaluation surplus 45 nil Retained earnings – 1 April 20X4 160 134 -year to 31 March 20X5 190 76 Total equity 745 330 Non-current liabilities 10% inter company loan (note (ii)) Nil 60 Current liabilities 108 81 Total equity and liabilities 853 471 (ii) Included in Highveldt’s investments is a loan of Rs.60 million made to Samson at the date of acquisition. Interest is payable annually in arrears. Samson paid the interest due for the year on 31 March 20X5, but Highveldt did not receive this until after the year end. Highveldt has not accounted for the accrued interest from Samson. (iv) Samson’s development project was completed on 30 September 20X4 at a cost of Rs.50 million. Rs.10 million of this had been amortised by 31 March 20X5. Development costs capitalised by Samson at the date of acquisition were Rs.18 million. Highveldt’s directors are of the opinion that Samson’s development costs do not meet the criteria in IAS 38 ‘Intangible Assets’ for recognition as an asset. Consolidated retained earnings Highveld. Samson Per question. 350. 76. Accrued interest From Samson Co 60x10%. 6 Unwinding of discount. (8) Amortization of Brand. (4) Development Expenditure (32) Write back amorti. 10 Unrealised profit. (2) 348. 48 Group share. 75%. 36 Impairment. 20*75%. (15) 369 1) Why do we include the finance income from the subsidiary in the retained earnings ? I thought we didn't include income from intercompany transactions in the consolidated retained earnings. Also when we have finance income and finance cost between the companies how do we eliminate them? 2)Also could you please explain me the calculation behind the fair value adjustments . Thank you.