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Dear Sir Moffat,
First of all, I would like to thank you for all the wonderful and easy-to-understand video lectures you provided to all of us. I am going through your lectures plus doing revision kits to prepare for my Sep exam and now I am up to chapter 16.
I have some questions regarding to the technical article (Business Valuation) from ACCA website, could you please help me on that?
My 1st Q, in the answer for part (b) of Borgonni and Venitra, I’m not sure why the post-acq equity value for Venitra is computed by dividing the post-acq equity value of Borgonni with 2. Is there any other to calculate this?
2nd Q, in the answer for part (C), “The share for share exchange may be beneficial for tax planning. Any capital gain earned on the sale of the shares will be rolled over until the gain is realised in cash.”
I don’t quite understand about the benefit to tax planning and why the capital gain can be rolled over? Is it personal tax benefit for individual shareholder of Venitra?
Thank you.
1st question:
Borgonni is giving 1 share in Borgonni for every 2 shares in Venitra. Therefore shareholders in Venitra are receiving 1/2 a share in Borgonni for every 1 share they currently hold in Venitra.
2nd question:
Yes – it is a personal tax benefit. If they were to sell their current shares for cash then they would have to pay tax on the gain. If instead they take shares, then they will only pay tax when (and if) they eventually sell these new shares.
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