Pandar

1. The intangible asset you are referring to is probably “popular internet domain name”. It is written in the question that it is renewable indefinitely at a nominal cost, therefore, the amortization is not included.

2. Salva’s finance cost is 3000. Pandar invested “immediately after its acquisition of Salva” i.e on 1.April.20X9, therefore, Interest cost after the acquisition is 2000 (50,000 x 8% x “6/12”), which is intra-group and should be excluded. The remaining 1,000 (3,000 – 2,000) will be charged for six months = 1,000 x 6/12 = 500. So Pandar 1800 + Salva 500 = 2300.

I am giving F7 in December 2015 and tried to answer your question in best of my knowledge. I may be wrong.

If the domain name had been included as a result of the fair valuation exercise as at date of acquisition, then it would have been shown in Salva’s SoFP.

If that had been the case, then it WOULD have featured in the consolidated SoFP

If the fair values have NOT been reflected after the fair value exercise as at date of acquisition then, upon consolidation, the intangible asset of the domain name WILL STILL be reflected in the consolidated SoFP

In this respect Ammar, you are incorrect. And, because of that, it would be preferable if you didn’t elevate yourself to the status of “tutor” – this page is entitled “Ask ACCA Tutor” for a reason 🙂

With all due respect, I was not trying to elevate myself to the status of “tutor” at all.
I just shared my approach to the question, therefore, I also included that I might be wrong. Moreover, I was waiting for your answer to check whether my approach is correct or not. However, I will refrain from commenting any further on this website. Acknowledged.

P.s I said we will NOT take it in Goodwill calculation and I was NOT referring to Statement of Financial Position. I might be wrong again.

Ammar, yes, you are wrong again. The unrecognized value of an intangible asset WILL BE included within the goodwill calculation

If it’s already reflected in the figures then it’s automatically taken into the goodwill calculation

if it’s not already reflected in the figures then we need to include it as an additional asset in the goodwill calculation

In both situations it is included in the goodwill calculations

I’m not sure they exist anymore. If they do then they will be in the revision section.

Thanks

Chris

Hi,

I doubt many people in the exam will have got this correct, so don’t worry about it too much as it is very tricky indeed.

We can’t simply pro-rate the 3,000 by 6/12 as some of this relates to the intra-group interest. As the intra-group interest is a post acquisition amount it will not be pro-rated, it is effectively the amount incurred for the 6-months since acquisition.

To work out the amount that needs to be pro-rated we therefore remove from the full expense the amount that is not going to be pro-rated, i.e. the 2,000. This means then that 1,000 is going to be the figure that relates to the full 12-months (3,000 – 2,000). This can then be pro-rated for 6-months, hence the (3,000 – 2,000) x 6/12 in the answer.

To then get the full amount to be included for the subsidiary for the 6-months we then need to add in the 2,000. This is a bit strange as this is then the amount that is deducted due to it being intra-group but is how it has been shown in the answer.

Hope that helps.

Thanks

Glad to hear that you’ve understood it. Try to not spend too long on trying to understand the more complex aspects of the questions. Stick to the basics and you will be fine.

Thanks