Page 42 - Finac2 Test 1 Slides - 3. Intra-Group Transactions

CONSOLIDATIONS AFTER THE DATE OF ACQUISITION

Calculations

C2. Reacquired right

COMMENT

• Impact of reacquired right on the separate financial statements:

• If the terms of the contract giving rise to the reacquired

right are not in line with current market transactions, the
contract will have a favourable or unfavourable

component.

• The contract is favourable to Italia as Italia receives an

annual fee of R50 458 in terms of the current agreement
whilst Italia would have received an annual fee of R35 000

in the market.

• The contract is effectively settled due to the business
combination (the group is viewed as a single entity and

cannot have a contract with itself).

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