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Accounting Assignment: Accounting Policy

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Added on  2020-06-06

Accounting Assignment: Accounting Policy

   Added on 2020-06-06

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ACCOUNTING
Accounting Assignment: Accounting Policy_1
Table of ContentsINTRODUCTION...........................................................................................................................1a) Affects of nature of consideration on the calculation of goodwill..........................................1b) Discussion of the concept full goodwill.................................................................................3c) Effect of selecting the full goodwill method rather than the proportion of net asset method.3d) Appropriate accounting policy to adopt in respect of measuring non-controlling interest atacquisition...................................................................................................................................5CONCLUSION................................................................................................................................6REFERENCES................................................................................................................................7.........................................................................................................................................................7
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Accounting Assignment: Accounting Policy_3
INTRODUCTIONIFRS 3 provides informations to improve the relevance, reliability and comparability ofdata provided for business combinations like acquisitions and mergers. It also describes abouttheir effects on calculations of goodwill. It regulates and frames the principles on the recognitionand measurement of assets and liabilities which is acquired by parent company. In this assignment, the present scenario's indicates that there are two companies Expanderplc and Target plc, in which Expander plc is going to acquire 70% stake in Target plc. Hence,through this assignment, calculation of goodwill both measuring non-controlling interest and fullgoodwill methods will be done. a) Affects of nature of consideration on the calculation of goodwillIn this present scenario, consideration is given in three parts which is; Cash purchases,acquisition through future lending of money and contingent shares (Bebbington, Unerman andO'Dwyer, 2014). Below is the explanation of considerations with the affect on calculation ofgoodwill:NCI at %NANCI at FV£m£mConsiderationCash at acquisition50005000Deferred Consideration992.75992.75Issued Expanded Shares49004900Contingent shares40004000Total Consideration14892.7514892.75NCI20583200A16950.7518092.75Less FV of NAOrdinary share capital400400Retained earnings14601460Fair value adjustments50005000B68606860VariationGoodwill at acquisition(A-B)10090.7511232.751142Cash at acquisition: In the above calculation of total purchasing cost of 70% stake ofTarget plc, cash purchases indicates instant payment of £5000 million at the time of acquiringstakes. This consideration doesn't carry any future value or discounted value, as there'simmediate payment done by Expander plc at the time of acquiring such assets. 1
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