Chapter 18 Consolidated Statement of Financial Position

Answer Exercise 1 W1 Shareholdings in S Ltd. Group Non-controlling interest % 80 20 100 W2 Net asset of S Ltd At date of acquisition Share capital Share pre"iu" #etained earnings Net assets W% &alculation of Good'ill (arent holding )in*est"ent+ at fair *alue N&- *alue at acquisition )per question+ Less/ 0air *alue of net assets at acquisition )W2+ Good'ill on acquisition W1 Non-controlling interest N&- *alue at acquisition )W%+ N&- share of post acquisition reser*es 220% 3 )2$!000 4 20!000+5 12!$00 1!000 1%!$00 W$ Group retained earnings 6 Ltd S Ltd/ 80% 3 )2$!000 4 20!000)W2++
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At the reporting date 20!000 10!000 2$!000 $$!000

20!000 10!000 20!000 $0!000

,0!000 12!$00 .2!$00 )$0!000+ 22!$00

.0!000 1!000

.1!000 &onsolidated state"ent of financial position as at %1 7ece"8er 2010 Non-current assets Good'ill )W%+ 22!$00 (ropert9! plant and equip"ent )8$!000 : 18!000+ 10%!000 Current assets )1,0!000 : 81!000+ Total assets E uit! and lia"ilities E uit! Share capital Share pre"iu" #etained earnings )W$+ Non-controllin# interest $%&' Current lia"ilities )1%$!000 : 1.!000+ Total e uit! and lia"ilities Answer Exercise ( W1 Shareholdings in S Ltd. Group Non-controlling interest % 80 20 100 W2 Net asset of S Ltd At date of acquisition 000 $00 12$ 200 2$0 At the reporting date 000 $00 %00 200 )80+ 2$0 12$!$00 211!000 %,;!$00

,$!000 %$!000 .1!000 1.1!000 1%!$00 18.!$00 182!000 %,;!$00

Share capital #etained earnings (lant fair *alue ad<ust"ent 7epreciation ad<. )200=$ 9ears 3 2 9ears+ >rand fair *alue ad<ust"ent

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A"ortisation ad<. )2$0=10 9ears 3 2 9ears+ 1!0.$ W% &alculation of Good'ill

)$0+ 1!120

000 (arent holding )in*est"ent+ at fair *alue &ash paid Share e3change )200 3 1.80+ 7eferred consideration )$00 3 0..$1+ N&- *alue at acquisition Less/ 0air *alue of net assets at acquisition )W2+ Good'ill on acquisition -"pair"ent &arr9ing good'ill 1!000 %,0 %., 1!.%, %80 2!11, )1!0.$+ 1!011 )2$8+ .8%

Note/ the cost of the in*est"ent in 6 Ltd?s S0( is 1 "illion! i.e. the cash consideration paid! 6 Ltd has/ " 7r -n*est"ent 1 &r >an@ 1 6 Ltd has not 9et recorded the share consideration or the deferred consideration. Ahe <ournals required to record these are/ 000 7r -n*est"ent %,0 &r Share capital 200 &r Share pre"iu" 1,0 And 7r -n*est"ent %., &r 7eferred consideration %., W1 Non-controlling interest N&- *alue at acquisition )W%+ N&- share of post acquisition reser*es 220% 3 )1!120 4 000 %80

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1!0.$+ )W2+5 N&- share of i"pair"ent )2$8 3 20%+

; %8; )$2+ %%.

W$ Group retained earnings 6 Ltd Bn'ind discount )W,+ S Ltd/ 280% 3 )1!120 4 1!0.$+5 -"pair"ent of good'ill )W%+ )80% 3 2$8+ 000 1!100 ).;+ %, )20,+ 1!1$1 W, Bn'inding of discount (resent *alue of deferred consideration at acquisition (resent *alue of deferred consideration at reporting date 000 %., 1$$ .; At acquisition! 6 Ltd should record a lia8ilit9 of %.,! 8eing the present *alue of the future cash flo' at that date. Ahe reporting date is t'o 9ears? lia8ilit9 and there is onl9 one 9ear to go until the deferred consideration 'ill 8e paid. Aherefore the lia8ilit9 in 6 Ltd?s S0( at this date is %., 3 102. So! 6 Ltd needs to/ 7r -nco"e state"ent 4 finance cost &r 7eferred consideration lia8ilit9 000 .; .;

&onsolidated state"ent of financial position as at %1 7ece"8er 2010 Non-current assets Good'ill )W%+ .8% >rand na"e )W2+ 200 (ropert9! plant and equip"ent )$!$00 : 1!$00 : 200 4 80+ .!120 8!10%

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Current assets -n*entor9 )$$0 : 100+ #ecei*a8les )100 : 200+ &ash )200 : $0+ Total assets E uit! and lia"ilities E uit! Share capital )2!000 : 200+ Share pre"iu" )0 : 1,0+ #etained earnings )W$+ Non-controlling interest )W1+ Non-current lia8ilities )%!000 : 100+ &urrent lia8ilities )1!2$0 : ,$0+ 7eferred consideration )%., : .;+

,$0 ,00 2$0 ;!,0%

2!200 1,0 1!1$1 %!$11 %%. %!818 %!100 1!;00 1$$ ;!,0%

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