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Looking at the consolidation question (Q1 (a)) I am having trouble figuring out why the goodwill calculation for Caller is not using the pre acquisition information. i.e.
Shares: $800
Ret Earns: $190
OCE: $52Instead the answers show that post acquisition data is used (a year after the acquisition). I’ve always thought that it was pre acquisition data that needed to be used.
My question is; why is this the case? And, how can I identify this sort of ‘trickery’ in the future.
If anyone has the reasoning behind this question please could you help me. Any further information on this question will gladly be given if required.
Am I not correct if I say that Caller was not a subsidiary during that year? So it wouldn’t be consolidated. The following year Trailer’s interest became that of a parent of a sub-subsidiary in a “D” shaped group. The retained earnings used for W3 are post-acquisition and for W2 Goodwill, we use the pre-acquisition retained earnings as at the date Caller became a sub-subsidiary
Is that ok?
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Ahh, thank you for clearing that up for me! It makes perfect sense now, and I can clearly understand the reasoning behind this, so any similar question that I come across I will be able to hopefully solve.
Thank you also, for a very speedy reply!
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