W-2 Net assets of Subsidiary as per KAPLAN

P has a policy of revaluing land and buildings to fair value. At the date of acquisition S’s land and
buildings had a fair value $20 million higher than their book value and at 31 March 2005 this had increased
by a further $4 million (ignore any additional depreciation).
(ii) Included in P’s investments is a loan of $60 million made to S at the date of acquisition. Interest
is payable annually in arrears. S paid the interest due for the year on 31 March 2005, but P did
not receive this until after the year end. P has not accounted for the accrued interest from S.
(iii) S had established a line of products under the brand name of Titanware. Acting on behalf of P, a
firm of specialists, had valued the brand name at a value of $40 million with an estimated life of 10 years as at
1 April 2004. The brand is not included in S’s balance sheet.
(iv) S’s development project was completed on 30 September 2004 at a cost of $50 million. $10 million of
this had been amortised by 31 March 2005. Development costs capitalised by S at the date of acquisition
were $18 million. P’s directors are of the opinion that S’s development costs do not meet the
criteria in IAS 38 ‘Intangible Assets’ for recognition as an asset.
(v) S sold goods to P during the year at a profit of $6 million, one-third of these goods were still in
the inventory of P at 31 March 2005.
(vi) An impairment test at 31 March 2005 on the consolidated goodwill concluded that it should be written down by
$22 million. No other assets were impaired.
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