Accounting Treatment for Building and Transactions

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Table of Contents
SECTION A.....................................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................5
SECTION B.....................................................................................................................................7
Question 4....................................................................................................................................7
Question 5....................................................................................................................................8

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 As-
sets 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 depreci-
ation (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
reporting 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 acquisi-
tion 395,000
Goodwill impair-
ment (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 acquisi-
tion 120,000
Add NCI' share of the post acquisition profit of
Mane 8,730
NCI at the reporting date 128,730