Page 482 - SBR Integrated Workbook STUDENT S18-J19
P. 482
Chapter 25
Example 6
Share transactions
Purchase consideration
Purchase consideration should be measured at its fair value. The fair value of
the shares issued was $3 million ($1m shares × $3). Recognising this will
increase goodwill and equity by $3 million. The adjustment required is:
Dr Goodwill $3.0m
Cr Share capital $1.0m
Cr Other components of equity $2.0m
Share purchase
The group holding has increased from 70% to 75%. There is no change in
control status so goodwill should not have been remeasured. Instead, the
transaction is accounted for in equity as a decrease to the NCI (from 30% to
25%). The adjustment required is:
Dr NCI (5/30 × ($18m + $3m see calc below)) $3.5m
Dr Other components of equity (bal. fig.) $0.5m
Cr Goodwill $4.0m
Goodwill
The goodwill arising on the acquisition of Hercule is:
$m
Cash consideration 50
Share consideration 3
NCI at acquisition 18
Net assets at acquisition (56)
––––
15
––––
There have been no impairments so goodwill at the reporting date will be $15
million.
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