Page 324 - SBR Integrated Workbook STUDENT S18-J19

Chapter 20

Exam focus

4.1 The SBR exam

The examining team have noted that question 1 in the SBR exam will
most likely require students to discuss how transactions should be
accounted for in the consolidated financial statements and/or to
produce extracts.

Example 2

Goodwill

Harry purchased 90% of the ordinary shares of Draco on 1 January 20X1 for
400 million dinars cash. At the acquisition date, the carrying amount and the
fair value of Draco’s identifiable net assets were 350 million dinars and 360
million dinars respectively. The non-controlling interest at acquisition is
calculated using the proportionate method. At 31 December 20X1, it was
determined that the goodwill arising on the acquisition of Draco was impaired
by 6 million dinars.

Exchange rates are as follows:

dinars:$1

1 January 20X1 10

31 December 20X1 12
Average rate 11

Advise how to deal with the goodwill arising on the above transaction in
the consolidated financial statements for the year ended 31 December
20X1.

318