Page 271 - SBR Integrated Workbook STUDENT S18-J19

Group accounting – Basic groups

5.3 Identify the acquisition date

This is the date on which the parent obtained control over the subsidiary.

5.4 Recognise the net assets

The acquirer must measure the identifiable assets acquired and the liabilities
assumed at their fair values at the acquisition date.

Example 6

Fair value of identifiable net assets

Lyra bought 80% of the ordinary shares of Pan on 31 December 20X1 when
the carrying amount of Pan’s net assets was $30 million. At the acquisition
date, Pan:

 owned land with a carrying amount of $4 million and a fair value of $9
million

 had an unrecognised brand name with a fair value of $8 million

 had disclosed a contingent liability relating to a future legal case.
Lawyers estimate that Pan will be required to pay $10 million if it loses
the case. The fair value of the contingent liability is $3 million.

What is the fair value of Pan’s identifiable net assets at the acquisition
date?

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