Page 39 - CIMA MCS Workbook February 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

 any operating segment that accounts for 10% or more of any one of the following is a
reportable segment in its own right:
 gross revenues (i.e. including internal sales and transfer revenues
 total assets
 total profits (if an operating segment made an operating profit)
 total losses (if an operating segment made an operating loss)
 ensure that the reportable segments accounts for 75% or more of net revenues (after
elimination of transfer revenues, consolidation adjustments

If there is insufficient analysis based upon application of the criteria, one or more additional
reportable segments must be identified to ensure that there is sufficient segmental reporting.

Application to Crowncare – Operating segments
As Crowncare is an unlisted entity, it is not mandatory that it complies with the requirements of
IFRS8. However, Crowncare could decide to make disclosures on a voluntary basis that comply
with IFRS 8, or such disclosures would be required should Crowncare decide to seek a listing for its
equity shares.

Group accounting issues ‐ IFRS 3 Business combinations
IFRS 3 requires that if a transaction which meets the definition of a business combination takes
place, goodwill must be calculated and recognised in the consolidated financial statements.
Goodwill is then subject to an annual impairment review to ensure that it is not over‐stated.

Goodwill at the date of acquisition is calculated as the fair value of consideration paid, plus the
fair value of any non‐controlling interest, less the fair value of the net assets at that date.

The fair value of consideration paid consists of cash paid at the date of acquisition, plus the
present value of any deferred consideration or contingent consideration plus the fair value of any
shares issued as part of the transaction. Goodwill arising on consolidation of a subsidiary is not
amortised; instead, it is subject to an annual impairment review.

Application to Crowncare
Crowncare does have subsidiaries and would therefore calculate goodwill on acquisition of each
subsidiary.

It may be that one or more subsidiaries was acquired during 2018 as the carrying amount for
goodwill in the SOFP has increased from V$61.502m in 2017 to V$80.949m in 2018. There is no
indication of any impairment to goodwill during 2018.

Group accounting issues ‐ IFRS 10 Consolidated financial statements
IFRS 10 requires that consolidated financial statements are prepared when one entity acquires
control of another via a business combination. In order to confirm that control has been acquired,
it is necessary to comply with three criteria:

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