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

Legal practice, Trust - Ancient legal practice where one person (GRANTOR) ...

Trust - Ancient legal practice where one person (GRANTOR) transfers the legal title to an ASSET, known as principal or corpus, to another person (the TRUSTEE), with specific instr

What should Peter do? Suggest alternative courses of action, Peter has wor...

Peter has worked for five years as an assistant accountant for a large garage and vehicle repair workshop. In the past two weeks he has noticed that one of the managers, Simon, ha

Sensitivity analysis of project, Q. Sensitivity Analysis of Project? Th...

Q. Sensitivity Analysis of Project? This system measures the change in project NPV arising from a fixed change in each project variable or measures the change in every project

Normal values of accounting ratios, Comparison with Sector Averages Any...

Comparison with Sector Averages Any conclusion relating to the signs of overtrading needs to be put in the context of the normal values of accounting ratios indicated by the se

Unrealized profit on closing inventory , UNREALIZED PROFIT ON CLOSING INVEN...

UNREALIZED PROFIT ON CLOSING INVENTORY Where one company has bought goods from another company in the group and part of these goods are included in the closing inventory, then t

their yield to maturity, Thatcher Corporation's bonds will mature in 12 ye...

Thatcher Corporation's bonds will mature in 12 years. The bonds have a face value of $1,000 and an 11.5% coupon rate, paid semi-yearly. The price of the bonds is $1,050. The bonds

Income statement, Income statement2013 2012 2011 Net revenue 5,075,390.. 4,...

Income statement2013 2012 2011 Net revenue 5,075,390.. 4,763,180.. 4,158,507 Cost of goods 1,377,242.. 1,297,102.. 1,134,966.. Gross profit 3,698,148.. 3,466,078.. 3,023,541 Total

Flexibility in debt finance, Q. Flexibility in Debt finance? Debt finan...

Q. Flexibility in Debt finance? Debt finance is more elastic than equity in that various amounts can be borrowed at a fixed or floating interest rate and for a range of maturit

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