Reference no: EM133115306

Question - A school friend you have not seen for a number of years is attempting a financial reporting exam paper and has asked for guidance on the business combinations achieved in stages (piecemeal acquisition).

Situation 1 Jeremy acquired 40% of the equity interest of David MUR 40 million several years ago. On 1 January 2018, Jeremy acquired an additional 35% for MUR 45 million when the fair value of identifiable net assets were MUR 105 million. The fair value of the non-controlling interest on 1 January 2018 was MUR 32 million and the fair value of the original 40% holding was MUR 52 million.

Situation 2 On 31 December 2018, Jeremy acquired a further 5% of David for MUR 8 million. David had made profits since being acquired by Jeremy of MUR 10 million. There has been no impairment of goodwill.

Required - Write a report to your friend explaining:

(i) the goodwill on the acquisition of David that will appear in the consolidated statement of financial position at 31 December 2018.

(ii) the profit on the de-recognition of any previously held investment in David to be reported in group profit or loss for the year 31 December 2018.