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    Week 2 - Exercise Question

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    kk23212
    ABC plc acquired 75% of DEF Ltd two years ago for initial cash consideration of £2m and 500,000 shares worth £600,000. It agreed to pay £400,000 more in 4 years. ABC's investments include its £2m investment in DEF. To prepare a consolidated statement of financial position, goodwill from the acquisition needs to be calculated and impaired, the non-controlling interest's value needs to be determined either based on net assets or fair value, and deferred consideration recognized as a liability. Consolidated assets, equity, and liabilities are presented.

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    Week 2 - Exercise Question

    Uploaded by

    kk23212
    8 views2 pages
    ABC plc acquired 75% of DEF Ltd two years ago for initial cash consideration of £2m and 500,000 shares worth £600,000. It agreed to pay £400,000 more in 4 years. ABC's investments include its £2m investment in DEF. To prepare a consolidated statement of financial position, goodwill from the acquisition needs to be calculated and impaired, the non-controlling interest's value needs to be determined either based on net assets or fair value, and deferred consideration recognized as a liability. Consolidated assets, equity, and liabilities are presented.

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    Week 2 - exercise question

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    ABC plc acquired 75% of DEF Ltd two years ago for initial cash consideration of £2m and 500,000 shares worth £600,000. It agreed to pay £400,000 more in 4 years. ABC's investments include its £2m investment in DEF. To prepare a consolidated statement of financial position, goodwill from the acquisition needs to be calculated and impaired, the non-controlling interest's value needs to be determined either based on net assets or fair value, and deferred consideration recognized as a liability. Consolidated assets, equity, and liabilities are presented.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    8 views2 pages

    Week 2 - Exercise Question

    Uploaded by

    kk23212
    ABC plc acquired 75% of DEF Ltd two years ago for initial cash consideration of £2m and 500,000 shares worth £600,000. It agreed to pay £400,000 more in 4 years. ABC's investments include its £2m investment in DEF. To prepare a consolidated statement of financial position, goodwill from the acquisition needs to be calculated and impaired, the non-controlling interest's value needs to be determined either based on net assets or fair value, and deferred consideration recognized as a liability. Consolidated assets, equity, and liabilities are presented.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    ACF301 – Financial Accounting I

    Week 2 – workshop question


    ABC plc acquired 75% of the share capital of DEF Ltd two years ago, when the reserves
    (retained earnings) of DEF Ltd stood at £300,000. ABC plc paid initial cash
    consideration of £2m. Additionally ABC plc issued 500,000 shares with a nominal
    value of £0.50 and a current market value of £1.20. It was also agreed that ABC would
    pay a further £400,000 in four years’ time. Current interest rates are 5% pa. The shares
    and deferred consideration have not yet been recorded. The following financial
    information is available:

    Statements of Financial Position at 31 December 2018


    ABC plc DEF Ltd
    £000 £000
    Non-current assets
    Property, Plant and Equipment 7,000 1,200
    Investments 2,000 0
    9,000 1,200
    Current assets 2,700 340
    Total assets 11,700 1,540

    Equity
    Called up share capital (£0.5 ordinary shares) 3,000 400
    Share premium 1,000 100
    Retained earnings 5,100 600
    Total equity 9,100 1,100
    Liabilities 1,500 300
    Current liabilities 1,100 140
    Total equity and liabilities 11,700 1,540

    The following information is also available:


    ➢ At acquisition the fair values of DEF Ltd’s plant exceeded its book value by
    £300,000. The plant had a remaining useful life of ten years at this date
    ➢ The consolidated goodwill has been impaired by 15%
    The ABC plc group values the non-controlling interest using the fair value at
    acquisition method. At acquisition the fair value of the non-controlling interest was
    £1,000,000.
    Required
    Prepare the consolidated Statement of Financial Position of ABC plc group as at 31
    December 2018 firstly using the proportion of net assets then secondly using fair value
    of the non-controlling interest
    Statements of Financial Position at 31 December 2018
    ABC Group
    £000
    Non-current assets
    Goodwill
    Property, plant and equipment
    Investments

    Current assets
    Total assets

    Equity
    Called up share capital (£1 ordinary shares)
    Share premium
    Retained earnings
    Non-controlling interest
    Total equity

    Non-current liabilities
    Deferred consideration
    Current liabilities
    Total equity and liabilities

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