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Revision Example 2 CONSOLIDATIONS AFTER THE DATE OF ACQUISITION

5. On 1 January 2016 a long-term loan of R80 000 was made by Auto Ltd to

Mobile Ltd and it was repayable in full on 1 January 2020. Interest was
calculated at 14% per annum and had been paid to Auto Ltd for the current

year.

6. Mobile Ltd purchased a machine from Auto Ltd for R140 000 on 1 July 2016.

The carrying amount of the machine on 1 July 2016 was R100 000. The machine
was originally purchased by Auto Ltd on 1 July 2013 for R250 000. Both

companies depreciate machinery over the useful life of five years using the
straight-line method, which is in line with the tax allowance used by the South

African Revenue Service. The expected useful life of the machine remained

unchanged.

7. In all companies, each share carries one vote.

8. The fair value of the equity investment is equal to the cost price thereof,

unless otherwise stated. The equity investment is measured at fair value

through other comprehensive income (FVTOCI).

9. At the end of the current year goodwill was assessed for impairment and it
was found that goodwill had not been impaired. The group uses the partial

goodwill method to recognise goodwill.
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