Determine the goodwill calculation, Financial Accounting

 A company purchased 16 million shares (representing an 80% controlling interest) in another company on 1 July 2010. The terms of the purchase were as follows:   

  • 1 share in the parent for every 4 shares in the subsidiary
  • An immediate cash payment of $20.5 million
  • A payment of 50% of the company's average annual profit for the first two years to be settled three years after the acquisition date. On 1 July 2010, the expected value of this payment (excluding any adjustment for the time value of money) was $10.2 million

The subsidiary's shares were trading at $20.40 at the date of acquisition. The parent's shares were trading at $15.20.

As a result of additional information available since the acquisition, the expected value of the payment based on profit (excluding adjustment for the time value of money) was revised to $11.4 million at 31 December 2010.

An appropriate annual discount factor for this company to use where necessary is 8%.


Determine the consideration transferred figure used in the goodwill calculation for inclusion in the consolidated financial statements for the year ended 31 December 2010.

1(m) On 1 December 2009, Panther, a public company acquired 70% of the ordinary share capital of Sabre, a private company. The functional currency of Panther is the $ and the functional currency of Sabre is the zet.

Panther paid $46 million for its investment in Sabre on 1 December 2009, when the net fair value of the identifiable assets acquired and liabilities assumed of Sabre were 26,400 million zets.

Given that Sabre is a private company, Panther decided to measure the non-controlling interests at acquisition at the proportionate share of the fair value of the identifiable net assets of Sabre.

An impairment test conducted at group level on the investment in Sabre at 31 December 2010 indicated impairment losses of 600 million zets (gross of non-controlling interests). No impairment loss adjustments had been necessary at the previous year end.

Relevant exchange rates were:

1 December 2009 $1 = 470 zets

31 December 2009 $1 = 478 zets

31 December 2010 $1 = 490 zets

Posted Date: 3/15/2013 3:03:38 AM | Location : United States

Related Discussions:- Determine the goodwill calculation, Assignment Help, Ask Question on Determine the goodwill calculation, Get Answer, Expert's Help, Determine the goodwill calculation Discussions

Write discussion on Determine the goodwill calculation
Your posts are moderated
Related Questions
assess the risk of material misstatement at assertion level

Illustration of Pre-Aquisition H Ltd.. Acquired 80% of S Ltd. during the year ended 31/12/04.  S Ltd. paid an interim dividend of  40,000 on 30th September and as at 31/12/04 h

Q. Describe Passive Income? Passive Income - Includes income derived from such sources like dividends, royalties, interest, rents, amounts received from personal service contra

Hi I am doing my thesis on IAS 40 and I''m sort of stuck with finding information. I need to find positive and negative international critique on the standard

US GAAP follows the Historical Cost Concept in valuing the cost of Long-Term Assets. Explain this principle and how it compares to the standards used in the reporting of Long-Term

i.   Explain carefully what is meant by a price earnings ratio. ii   Utilising a valuation model identify and briefly discuss the theoretical determinants of the ratio. iii

There are two projects A and B. The initial capital outlay of A and B are Rs.1,35,000 and Rs.2,40,000 respectively. There will be no scrap value at the end of the life of both the

1. Calculate the profitability index for a project that has a net present value equal to -$10,000. The project's net investment is $20,000. 2. A project requires a net investmen

The following accounts and balances have been taken from the general ledger trial balance of Daiton Repairs Limited as at October 31, 19×2, after its first year of operation. Adjus

The Wanless Corporation provides Internet consulting services to a wide-range of customers. The company's fiscal year ends on December 31. For the year ended December 31, 2011, the