Pedantic

Calculation of goodwill for subsidiary Adjustments for retained earnings

£’000 £’000 Pedantic Sophistic
Cost of investment £’000 £’000
Shares in Pedantic 9,600 (0.6*4000)*2/3*6 Retained earnings 35,400 6,500
Acquisition costs 300 Under-depreciation (200) [6 mths depn]
9,900 Unrealised profit on inventory sale (800) [(8m - 5.2m) X 40/140
less: net assets acquired Acquisition costs - admin expenses 300 [part of gdwill]
Share capital 4,000 Retained earnings (adjusted) 35,700 5,500
Profit & loss account 5,000 less: pre-acq reserve (5,000)
Fair value adjustment: plant 2,000 Ending retained earnings 35,700 500
11,000 Share of net assets 100% 60% Total RE
Share of net assets 60% 35,700 300 36,000
(6,600)
Goodwill 3,300

Ending P/L account balance 6,500

Post-acq reserve (profit earned) 1,500 [3,000 X 6/12]
Pre-acq reserves 5,000
Pedantic
Consolidated Balance Sheet as at 30 September 2008
£’000 £’000 £’000
Non-current Assets
Tangible assets 55,000 [+ 2m reval gain/ - 200k depn]
Goodwill 3,300
58,300

Current Assets 21,400 [16m + (6.6m-800k-600k+200k)]

Total assets 79,700

Equity & Reserves

Share capital 11,600 [10m+(4mX60%X2/3X$1)]
Share premium 8,000 [4mX60%X2/3X$5)]
Profit and loss account 36,000
55,600 <NCI% X (end share cap + RE + ARR)>
Non-controlling interests 4,600 [(4m+5.5m+2m)X40%]
60,200

Non-current Liabilities
10% loan notes 7,000

Current Liabilities
Creditors (due within one year) 12,500 [minus interco 400k]
Total equity & liabilities 79,700
Pedantic
Consolidated Income Statement for the year ended 30 Septemober 2008

£’000
Sales 98,000 [85k + (42k X 6/12) - 8k ]
Cost of Sales (72,000) [63k + (32k X 6/12) - 8k + 0.8k + 0.2k]
Gross profit 26,000
Distribution costs (3,000) [2k + (2k X 6/12)]
Administrative expenses (7,300) [6k + (3.2k X 6/12) - 0.3k]
Finance costs (500) [0.3k + (0.4k X 6/12)]
Profit before tax 15,200
Tax (5,400) [4.7k + (1.4k X 6/12)]
Profit after tax 9,800
Profit attibutable to:
Equity shareholders 9,600
Non-controlling interests 200 [40% X ((3kX6/12)-0.2k-0.8k)]
9,800

Check:
Profit after tax and NCI 9,600
Dividends -
Retained profit for the year 9,600
Retained profit brought forward 26,400 [P only as acq during the year]
Retained profit carried forward 36,000 as per RE workings
Premier
Calculation of goodwill for subsidiary Adjustments for retained earnings
£’000 £’000 Premier Sanford
Cost of investment £’000 £’000
Shares in Premier 12,000 (0.8*5k)*3/5*5 Retained earnings 12,300 4,500
6% loan notes 800 (08*5k)/0.5k*100 Over-depreciation 50
NCI 3,500 (0.2*5k)*3.5 Unrealised profit on inventory sale (400) [25/125 X 2k]
16,300 Retained earnings (adjusted) 12,300 4,150
less: net assets acquired less: pre-acq reserve (3,200)
Share capital 5,000 Ending retained earnings 12,300 950
Retained earnings - at 1 Jun 2010 3,200 [4,500 - (3,900 X 4/12)] Share of net assets 100% 80% Total RE
Fair value adjustment - plant (1,200) 12,300 760 13,060
(7,000)
Goodwill 9,300
Premier
Consolidated Statement of Financial Position as at 30 Sep 2010
£’000 £’000
Non-current Assets
Property, plant & equipment 38,250 [-1.2m reval loss/ + 50k depn]
Investments 1,300 [1,800 - 800 + 300]
Goodwill 9,300
48,850

Current Assets 14,150 [12,500 + 2,400 - 400 -350]

Total assets 63,000

Equity & Reserves

Share capital 14,400 [12m+(2.4k X $1 par)]
Share premium 9,600 [2.4k X $4 par)]
Revaluation reserve 2,000
Other equity reserve 800 [500 + 300]
Retained earnings 13,060
39,860
Non-controlling interests 3,690 [pre-acq 3.5m + post-acq (20% X 950k)]
43,550

Non-current Liabilities -
6% loan notes 3,000

Current Liabilities 16,450 [minus interco 350k]

Total equity & liabilities 63,000 -
Premier
Consolidated Income Statement for the year ended 30 Septemober 2010

£’000
Sales 103,500 [92.5k + (45k X 4/12) - (4 X 1k) ]
Cost of Sales (78,850) [70.5k + (36k X 4/12) - (4 X 1k) + 0.4k - 0.05k]
Gross profit 24,650
Distribution costs (2,900) [2.5k + (1.2k X 4/12)]
Administrative expenses (6,300) [5.5k + (2.4k X 4/12)]
Finance costs (100)
Profit before tax 15,350
Tax (4,400) [3.9k + (1.5k X 4/12)]
Profit after tax 10,950
Profit attibutable to:
Equity shareholders 10,760
Non-controlling interests 190 [20% X ((3.9kX4/12) + 0.05k - 0.4k)]
10,950

Check:
Profit after tax and NCI 10,760
Dividends -
Retained profit for the year 10,760
Retained profit brought forward 2,300 [P only as acq during the year]
Retained profit carried forward 13,060 as per RE workings
Paradigm
Calculation of goodwill for subsidiary Adjustments for retained earnings
£’000 £’000 Paradigm Strata
Cost of investment £’000 £’000
Shares in Pedantic 12,000 (0.75*20k)*2/5*2 Retained earnings 26,600 4,000
10% loan notes 1,500 (0.75*20k)/1k*100 Over-depreciation 500 [6 mths depn]
NCI 6,000 (0.25*20k)*1.2 Unrealised profit on inventory sale (600)
19,500 Gain/(loss) in equity investment (400) 700
less: net assets acquired Retained earnings (adjusted) 25,600 5,200
Share capital 20,000 less: pre-acq reserve 6,000
Retained earnings - at 1 Apr 12 (4,000) Ending retained earnings 25,600 11,200
Retained earnings - 1 Apr to 30 Sep (2,000) Share of net assets 100% 75% Total RE
Fair value adjustment - plant (3,000) [2mLoss+3mReval] 25,600 8,400 34,000
(11,000)
Goodwill 8,500 Unrealised profit
P to S £’000
Ending P/L account balance 6,500 Price of unsold inventory 4,600
Post-acq reserve (profit earned) 1,500 [3,000 X 6/12] Cost of unsold inventory 4,000 [4.6m X 100/115]
Pre-acq reserves 5,000 Unrealised profit 600 [4.6m X 15/115]
Paradigm
Consolidated Statement of Financial Position as at 31 March 2013
£’000 £’000
Non-current Assets
Property, plant & equipment 70,400 [-3m reval loss/ +500k depn]
Financial asset: equity investment 11,000
Goodwill 8,500
89,900

Current Assets
Inventory 28,200 [less unrealised profit]
Trade receivables 20,100 [less interco (2.8m+900k)]
Bank 3,000 51,300 [add cash-in-transit 900k]
Total assets 141,200

Equity & Reserves

Share capital 46,000 [40k + (0.75*20k)*2/5*1]
Share premium 6,000 [(0.75*20k)*2/5*1]
Retained earnings 34,000
86,000
Non-controlling interests 8,800 [pre-acq 6m + post-acq (25% X 11.2m)]
94,800

Non-current Liabilities
10% loan notes 9,500 -
-
Current Liabilities
Trade payables 27,800
Bank overdraft 9,100
Creditors (due within one year) 36,900 [minus interco 400k]
Total equity & liabilities 141,200 -
Polestar
Calculation of goodwill for subsidiary Adjustments for retained earnings
£’000 £’000 Polestar Southstar
Cost of investment £’000 £’000
Immediate cash payment 13,500 (75% X 6m/0.5) X $1.50 Retained earnings 28,500 12,000
Contingent consideration 1,800 Negative goodwill w/o 3,400
NCI 3,600 (25% X 6m/0.5) X $1.20 Decrease in contingent consideration 300
18,900 Under-depreciation (100) [(2m/10 yrs) X 6/12]
less: net assets acquired Unrealised profit on inventory sale (600) [(9m-5.4m) X 1.5m/9m]
Share capital 6,000 Gain/(loss) in equity investment (200)
Retained earnings - at 1 Apr 2013 14,300 [12,000 - (-4,600 X 6/12)] Retained earnings (adjusted) 32,000 11,300
Fair value adjustment: property 2,000 less: pre-acq reserve (14,300)
(22,300) Ending retained earnings 32,000 (3,000)
Goodwill (3,400) Share of net assets 100% 75% Total RE
32,000 (2,250) 29,750
Polestar
Consolidated Statement of Financial Position as at 30 Sep 2013
£’000 £’000
Non-current Assets
Property, plant & equipment 63,900 [+2m reval gain/ - 100k depn]
Euqity investments 2,300 [16,000 - 13,500 - 200]
66,200

Current Assets 20,700 [16,500 + 4,800 - 600]

Total assets 86,900

Equity & Reserves

Share capital 30,000
Retained earnings 29,750
59,750
Non-controlling interests 2,850 [pre-acq 3.6m + post-acq (25% X 3,000k loss)]
62,600

-
Current Liabilities 24,300 [include contingent consideration 1.5m]
Total equity & liabilities 86,900 -
Polestar
Consolidated Income Statement for the year ended 30 Septemober 2013

£’000
Sales 130,000 [110k + (66k X 6/12) - (4k + 9k) ]
Cost of Sales (109,300) [88k + (67.2k X 6/12) - (4k + 9k) + 0.6k + 0.1k]
Gross profit 20,700
Other income 3,700 [3.4k + 0.3k]
Distribution costs (4,000) [3k + (2k X 6/12)]
Administrative expenses (6,650) [5.25k + (2.4k X 6/12) + 0.2k]
Finance costs (250)
Profit before tax 13,500
Tax (3,000) [3.5k + (-1k X 6/12)]
Profit after tax 10,500
Profit attibutable to:
Equity shareholders 11,250
Non-controlling interests (750) [25% X ((-4.6k X 6/12) - 0.1k - 0.6k)]
10,500

Check:
Profit after tax and NCI 11,250
Dividends -
Retained profit for the year 11,250
Retained profit brought forward 18,500 [P only as acq during the year]
Retained profit carried forward 29,750 as per RE workings