Page 444 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 20

Example 18.1 cont'd

(W2) Net assets of subsidiary (from translated figures W6)

Acquisition Reporting Post-
date acquisition
$ $ $
Share capital 2,400 2,400
Retained earnings – pre-acq 640 640
Retained earnings – post-acq 8,560 8,560
––––––– ––––––– –––––––
3,040 11,600 8,560
––––––– ––––––– –––––––

(W3) Goodwill (in foreign currency €’s)
€
Fair value of P's investment 16,800
NCI at fair value at acquisition 3,600
Less: S's net assets at acquisition (12,000 + 3,200 W6) (15,200)
––––––
Goodwill at acquisition 5,200
Impairment (800)
––––––
Goodwill at reporting date 4,400

At closing rate 4,400/2
$2,200

Translation of goodwill:
$ $
Goodwill at reporting date (4,400/2) 2,200
At acquisition @ HR (5,200/5) 1,040
Impairment in current year at average rate (800/2.5) (320)
–––––
Goodwill before translation 720 (720)
–––––
Total exchange difference β 1,480

Fair value method used for goodwill. Forex gain split 80% to Parent ($1,480 ×
80% = 1,184 (W5)) and 20% to NCI ($1,480 × 20% = 296 (W4)).

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