Page 273 - SBR Integrated Workbook STUDENT S18-J19

Group accounting – Basic groups

Example 7

Fair value of consideration

Following on from Example 6, the consideration transferred by Lyra is detailed
below:

 cash of $25 million

 cash of $10 million that will be paid in one year’s time

 cash of $15 million that will be paid in three years’ time if Pan’s profits
exceed an agreed amount. The fair value of this consideration is $6
million.

 two million of its own shares, which had a nominal value of $1 and a fair
value of $2.50.

Lyra incurred legal fees of $0.1 million on the acquisition. A discount rate of
5% should be used when required.

What is the fair value of the consideration transferred by Lyra?

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