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 | 2,750 | 3,600 |
| Land & buildings | 456 | 1,035 |
| Investment in P | 1,650 | |
| Current Assets | ||
| Inventory | 150 | 90 |
| Receivables | 350 | 210 |
| Bank | 60 | 48 |
| 560 | 348 | |
| Total Assets | 5,416 | 4,983 |
| Equity | ||
| $1 ordinary shares | 1,300 | 2,200 |
| Reserves | 3,816 | 2,603 |
| Payables | 300 | 180 |
| Total equity and liabilities | 5,416 | 4,983 |
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 $56 million in reserves. The fair value of the non-controlling interest at the date of acquisition was $1,110.
b. At the date of the acquisition the freehold land of P was valued at $90 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 $15 million.
d. At 31 December 2014 P owes S $60 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
=$1,650 + $1,110 -$2,200 -$56 - $90
=$414
CONSOLIDATED FINANCIAL POSITION
| S | P | CONSO | REMARKS | |
| Plant | 2,750 | 3,600 | 6,350 | |
| Land & buildings | 456 | 1,035 | 1,581 | 90 |
| Investment in P | 1,650 | Delete | ||
| Goodwill | 414 | Working | ||
| Current Assets | ||||
| Inventory | 150 | 90 | 225 | (15) |
| Receivables | 350 | 210 | 500 | (60 ) |
| Bank | 60 | 48 | 108 | |
| 560 | 348 | 833 | ||
| Total Assets | 5,416 | 4,983 | 9,178 | |
| Equity | ||||
| $1 ordinary shares | 1,300 | 2,200 | 1,300 | Delete P |
| Reserves | 3,816 | 2,603 | 5,839 | Working |
| NCI | 1,619 | Working | ||
| Payables | 300 | 180 | 420 | (60) |
| Total equity and liabilities | 5,416 | 4,983 | 9,178 |
Working:
NCI = NCI AT ACQUISITION + 20% SHARE OF POST ACQUISITION PROFIT FROM P
=1,110 + 509
=$1,619
CONSO RETAINED EARNINGS =S'S CONSOLIDATED PROFIT + 80% SHARE OF POST ACQUISITION PROFIT FROM P - UNREALISED PROFIT (P)
=3,816 +2,038-15
=$5,839
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