Online Exam (Financial Reporting)

Online Exam (Financial
Reporting)

Table of Contents
SECTION A.....................................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................3
SECTION B.....................................................................................................................................3
Question 4....................................................................................................................................3
Question 5....................................................................................................................................4

SECTION A
Question 1
A).
Step 1
Group structure
Parent 70%
NCI 30%
Step 2
Calculate the consideration transferred £000
Cash 220,000
Contingent consideration 20,000
Deferred consideration (200m x 0.83) 166,000
Consideration transferred 406,000
Dr Investment 186,000
Cr Deferred consideration 166,000
Cr Contingent consideration 20,000
Step 3
Calculate Fair value of net assets at the date of acquisition and at the reporting date.
FV of Net Assets FV of Net Assets
01-04-19 31-03-20
£000 £000
Share capital 100,000 100,000
Retained earnings 24,000 55,000
Fair value adjustment for land (4000 - 5000) (1,000) (1,000)
Fair value adjustment-buildings (10,000 -12,000) (2,000) (2,000)
Reduced depreciation for buildings (-
2000/20) 100
Fair value adjustment-plant (30000-20000) 10,000 10,000

Additional deprecia-
tion (2,000)
131,000 160,100
Calculate the post acquisition profit of
Mane £000
Fair value of Mane assets at the reporting
date 160,100
Fair value of Mane assets at the date of acquisition (131,000)
Post acquisition profit/loss 29,100
This will be shared between the group and the NCI as follows:
£000
Group (70%) 20,370
NCI
(30%) 8,730
29,100
Step 4: Calculate the goodwill at the date of acquisition and at the re-
porting date
£000
Consideration transferred 406,000
Fair value of NCI (30% x 200m x 2) 120,000
526,000
Fair value of net assets at acquisition date (from step
2) (131,000)
Goodwill arising on acquisition 395,000
Goodwill impairment (400,750)
Goodwill at reporting date (5,750)
Step 5
Calculate the NCI at the reporting date £000
Fair value of NCI at the date of acquisition 120,000