=+Question 2 Based on ICAI, P3 Summer 1999, Question 5)

SWEET ple was founded in the 1970s. During the 1980s SWEET plc relied upon external acquisition to expand. For the last 7-8 years the group has focused upon internal development. However, on 1 January 2003, SWEET ple acquired 75% of the ordinary share capital of GENTLE Limited. The purchase was financed by €365 million in‘ cash and 50 million €1 ordinary shares with a market value of €75 million. The statement of financial position of GENTLE Limited at 1 January 2003 showed:

€m Property, plant and equipment 420 Inventory 300 Receivables 240 Bank deposit account 19 Bank overdraft (275)

Trade payables (160)

‘Taxation | (64) 380 The directors of SWEET estimate that the goodwill arising on the acquisition of GENTLE had been impaired by €16 million at 31 December 2003. This has been charged to ‘other operating expenses’ in the consolidated statement of comprehensive income for the year ended 31 December 2003.