Determine the goodwill calculation, Financial Accounting

Assignment Help:

 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%.

Requirement

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


Related Discussions:- Determine the goodwill calculation

Holding company, define the term of pre-acquisition diviend

define the term of pre-acquisition diviend

Concept of accounting for wealth creation, Concept of accounting for Wealth...

Concept of accounting for Wealth creation It is significant to recognise that generating wealth for the owners isn't the same as seeking to maximise the current year's profit.

Operating segments, Vincent Ltd operates solely in Western Australia and th...

Vincent Ltd operates solely in Western Australia and the chief operating decision maker has identified five operating segments: Mining, Insurance, Retailing, Manufacturing and Tran

Determine the amount of translation adjustment, Alliance Corporation (an Au...

Alliance Corporation (an Australian company) invests 1,000,000 marks in a foreign subsidiary on January 1, Year 1. The subsidiary commences operations on that date, and generates n

Which statements is correct, In its first month in business, Jones, Inc. so...

In its first month in business, Jones, Inc. sold merchandise to customers on account for $119,800. It collected $72,000 on those sales during the first month and recorded Revenue f

Project, Looking for someone who can help me with my investment project

Looking for someone who can help me with my investment project

Rate of return on assets, EVERLIGHT COMPANY LIMITED Comparative Balan...

EVERLIGHT COMPANY LIMITED Comparative Balance Sheet December 31, Year 1 and Year 2     Year 1       Year2

Introduction to pension funds, Introduction to Pension funds Pension fu...

Introduction to Pension funds Pension funds are normally set up to provide pension benefits to employees who have retired. The pension funds receive contributions mainly from e

Pre-acquisition losses in subsidiary company, Pre-acquisition losses in sub...

Pre-acquisition losses in subsidiary company on date of acquisition If the subsidiary company has a loss on the date of acquisition i.e. a debit balance in the retained profits

Calculate the total capital, The current balance sheet of CBKH shows $800 m...

The current balance sheet of CBKH shows $800 million of corporate loans ($500 million of which being rated AA- and the remaining rated BBB+), $200 million of bonds issued by an OEC

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd