The Examiner's Answers – F2 - Financial Management Some of the answers that follow are fuller and more comprehensive than would be expected from a well-prepared candidate. They have been written in this way to aid teaching, study and revision for tutors and candidates alike.
SECTION A Answer to Question One (i) Goodwill on acquisition (calculated at date control gained – on I July 2010) $000 Consideration transferred for 60% of shares Non-controlling interest at fair value at 1 July 2010 Less fair value of net assets acquired: Share capital Retained earnings Goodwill arising
1,000 2,760
$000 3,250 1,960
(3,760) 1,450
(ii) Group retained earnings
Retained earnings of SD at 30 June 2011 60% x RE of KL from acquisition to 1 March 2011 60% x [($3,400,000 - $2,760,000) x 8/12] 80% x ($640,000 x 4/12) Adjustment to parent’s equity (W1) Group share of unrealised profit on inventories transferred 80% x (40% x $750,000 x 25/125)
$000 9,400 256 171 66 (48) 9,845
(iii) Non-controlling interests
On acquisition Share of post-acquisition profits to 1 March 2011 40% x [($3,400,000 - $2,760,000) x 8/12)] NCI value at disposal date Disposal of 20% of 40% holding Share of profit for last 4 months 20% x ($640,000 x 4/12) Less NCI share of unrealised profit on inventories 20% x (40% x $750,000 x 25/125) NCI at reporting date
Financial Management
1
$000 1,960 171 2,131 (1,066) 1,066 43 (12) 1,096
September 2011