=+Question 5 (Based on ICAI, P3 Summer 2004, Question 5)

On 1 January 2000, SHINE Limited (SHINE) acquired 75% of the ordinary share capital of WISDOM Limited (WISDOM), an American company, for €36,000,000. At the date of acquisition, the book value of WISDOM's net assets, which was the same as their fair value, totalled $80,000,000. For the purposes of measuring non-controlling interests at the date of acquisition, the proportionate share method equated to the fair value method. WISDOM was to act as a selling agent for SHINE’s products in the United States. SHINE accounts for dividends on a received basis, and it is Group policy to reflect any goodwill impairment within operating expenses. The summarised statements of comprehensive income for SHINE and WISDOM for the year ended 31 December 2003 are as follows:

SHINE WISDOM

€'000 $000 Revenue 460,000 24,800 Cost of sales (238,000) (15,400)