EBOS Group Limited Consolidation: Technical Aspects Memo

This report provides a detailed memorandum to the Board of Directors regarding the technical aspects of EBOS Group Limited's consolidation, drawing directly from the company's 2018 annual report. It addresses key areas such as goodwill on acquisition following the Alchemy Holdings Pty Ltd acquisition, its recognition as an asset, and related accounting standards (AASB 139 and 9). The report further examines the handling of foreign currency transactions, including the use of financial instruments for hedging against foreign currency movements, and adherence to New Zealand accounting standards for recognizing assets and liabilities at fair value. Finally, it suggests that CGUs should be responsible for allocating goodwill if the acquisition consideration exceeds the asset's fair value. The analysis aims to assist the board in understanding the financial statements and potential risks associated with these transactions. Desklib provides a platform for students to access similar solved assignments and past papers for academic assistance.

0MEMOMEMO
Finance
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1FINANCE
MEMO
To: Board of Directors
From:
Date: January 13, 2019
Subject: Technical aspects of consolidation of EBOS Group Limited
Introduction
EBOS Group is the leading as well as most expanded Australasian vendor, retailer and
supplier of, medical, pharmaceutical products as well as healthcare. It is also an important
dealer and supplier of predictable customer goods including animal care marques.
Acquisition on Goodwill
After acquisition of Alchemy Holdings Pty Ltd. The acquisition balance sheet was
decided on provisional basis as at 30th June 2017. The goodwill on acquisition resulted to
$127.0 million. CGU`s is included for allocating the goodwill for Alchemy acquisition. As
the size of acquisition is considered as the interest area of the investors. If there is arrival of
goodwill at the time of acquiring the subsidiary company it is recognised as asset on the date
of acquiring. Goodwill is dignified as the surplus of the totality of the consideration
transmitted, the sum of any non-controlling interest during acquirement including the fair
value that has been held by the acquirer’s previously. If there is any equity interest of acquire
above the fair value of the detectable net assets identified. The goodwill is recorded in the
balance sheet under intangible asset head. The adjustments related to it are disclosed in notes
of accounts. According to the standards of AASB of 139 and 9. (Detzen, Wersborg, and
Zülch 2015).

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Impairment
EBOS scrutinize the recoverable quantity of its tangible including intangible assets, goodwill,
at every balance date. An impairment of asset is identified under the income statement if
recoverable amount results in less than the carrying value.
Goodwill including fair value amendments rising on the procurement of an overseas entity
are preserved as assets as well as liabilities of the overseas company including interpreted at
the conversation rate at the recording date. (Setiawan, and Febriana, 2017).
Foreign Currency Transactions
The matter related to it is discussed under the risk management in the annual report. EBOS
had discussed about its management regarding the usage of fiscal instruments for hedging
against the foreign currency movements. Basically EBOS is bare to foreign currency risk
rising mostly from the obtaining of properties denominated in overseas currencies such as US
dollar, AUD, Euro, Thai baht, as well as British pound. Foreign exchange rate experiences
are accomplished operating accelerative foreign exchange agreements. EBOS arrives into
onward foreign exchange agreements to achieve the risk related with expected future
acquisition transactions denominated in overseas currencies in agreement with the Board
accepted treasury procedure. Foreign currency transactions are interpreted into the functional
currency of the company by means of the exchange rate on the day of the deal. At every
balance sheet date, financial assets including liabilities that are denominated in overseas
currencies are interpreted at the charges prevalent on the balance sheet time. Non-financial
assets as well as liabilities that are restrained in relations of past cost in an overseas currency
are not reinterpreted. Altercation variances ascending on the clearance of financial matters,
and on the transformation of fiscal substances, are comprised in the Consolidated Income
Statement for the dated. (Ebosgroup.com, 2019)

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Suggestions
New Zealand accounting standards need the buyer to recognise the component of
balance sheet that is assets as well as liabilities attained in a commercial combination, as well
as recognisable intangible assets, along with measuring them at fair value on the day of
acquisition. CGU shall be liable to allocate goodwill in case the acquisition is been done on
the excess payment of consideration over the fair value of the asset.
Thanking you,
Regards

4FINANCE
Reference:
Detzen, D., Wersborg, T.S.G. and Zülch, H., 2015. Bleak Weather for Sun-Shine AG: A Case
Study of Impairment of Assets. Issues in Accounting Education, 30(2), pp.18-39.
Ebosgroup.com. (2019). EBOS delivers record 2018 earnings » EBOS Group Limited.
[online] Available at: https://www.ebosgroup.com/about-us/investor-news/ebos-delivers-
record-2018-earnings/ [Accessed 13 Jan. 2019].
Setiawan, P.J. and Febriana, B., 2017. Regulation on Restriction of Cash Transaction to
Prevent and to Eradicate Financial Crime.
Stankevičienė, J., Maknickienė, N. and Maknickas, A., 2014, May. Investigation of exchange
market prediction model based on highlow daily data. In The 8th international scientific
conference “Business and Management 2014 (pp. 15-16).