The draft statements of financial position of S and its subsidiary company P at 31 December 2014 are as follows:
| S | P | |
| Million $ | Million $ | |
| Plant | 4,950 | 4,800 |
| Land & buildings | 3,192 | 2,760 |
| Investment in P | 3,300 | |
| Current Assets | ||
| Inventory | 350 | 210 |
| Receivables | 300 | 180 |
| Bank | 120 | 96 |
| 770 | 486 | |
| Total Assets | 12,212 | 8,046 |
| Equity | ||
| $1 ordinary shares | 1,300 | 2,200 |
| Reserves | 10,762 | 5,756 |
| Payables | 150 | 90 |
| Total equity and liabilities | 12,212 | 8,046 |
The following information is also available.
a. S purchased 1,760 million shares in P some years ago, when P had a credit balance of $42 million in reserves. The fair value of the non-controlling interest at the date of acquisition was $925.
b. At the date of the acquisition the freehold land of P was valued at $20 million in excess of its book value. The valuation was not recorded in the accounts of P.
c. P's inventory includes goods purchased from S at a price that includes a profit to S of $3 million.
d. At 31 December 2014 P owes S $108 million for goods purchased during the year.
Required.
a. Calculate the goodwill on acquisition.
b. Prepare the consolidated statement of financial position for S as at 31 December 2014.
Suggested Solutions:
A. GOODWILL
=CONSIDERATION + NCI AT ACQUISITION - SHARE OF N - PREACQUISITION RESERVE -FAIR VALUE ADJUSTMENT
=$3,300 + $925 -$2,200 -$42 - $20
=$1,963
CONSOLIDATED FINANCIAL POSITION
| S | P | CONSO | REMARKS | |
| Plant | 4,950 | 4,800 | 9,750 | |
| Land & buildings | 3,192 | 2,760 | 5,972 | 20 |
| Investment in P | 3,300 | Delete | ||
| Goodwill | 1,963 | Working | ||
| Current Assets | ||||
| Inventory | 350 | 210 | 557 | (3) |
| Receivables | 300 | 180 | 372 | (108 ) |
| Bank | 120 | 96 | 216 | |
| 770 | 486 | 1,145 | ||
| Total Assets | 12,212 | 8,046 | 18,830 | |
| Equity | ||||
| $1 ordinary shares | 1,300 | 2,200 | 1,300 | Delete P |
| Reserves | 10,762 | 5,756 | 15,330 | Working |
| NCI | 2,068 | Working | ||
| Payables | 150 | 90 | 132 | (108) |
| Total equity and liabilities | 12,212 | 8,046 | 18,830 |
Working:
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM P
=925 + 1,143
=$2,068
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM P - UNREALISED PROFIT (P)
=10,762 +4,571-3
=$15,330
To do the same topic again in ACCA F3 prepare consolidated financial position 2
To do another topic in ACCA F3
ACCA F3 PREPARE CONSOLIDATED FINANCIAL POSITION 2