Page 451 - SBR Integrated Workbook STUDENT S18-J19

Answers

Example 6

Fair value uplifts

Uplifting Espresso’s inventory to fair value will give rise to a taxable temporary
difference because the carrying amount of inventories in the consolidated
statements exceeds the tax base by $3 million. A deferred tax liability will be
recorded in the consolidated financial statements at $0.6m ($3m × 20%). This
is deemed to be a liability of the subsidiary at the acquisition date.

Goodwill at acquisition is calculated as follows:

$m $m
Consideration 18
NCI at acquisition 10
Less FV of net assets:
Share capital 1.0

Retained earnings 16.0
FV uplift 3.0
Deferred tax on FV uplift (0.6)
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(19.4)
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Goodwill at acquisition 8.6
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