Deutsche Telekom AG, headquartered in Bonn, Germany, is the largest telecommunications company in Europe. The company uses IFRS to prepare its financial statements. Assume that during 2011, Deutsche Telekom acquired a controlling interest in Hellenic Telecommunications Organization, S.A. (Hellenic). The table below shows the pre- and post-acquisition values of Hellenic's assets and liabilities.

Required

a. At the acquisition, which measurement does the company use, fair value or carrying value, to record the acquired tangible and intangible assets on its consolidated balance sheet?
\(b\). At the acquisition date, why is fair value of goodwill less than its carrying value?

c. What are some possible reasons why intangible assets increased in value at the acquisition date?

d. Describe accounting for goodwill. Why is an impairment test difficult to apply?

e. What would Deutsche Telekom record if it determined at the end of fiscal 2011 that the goodwill purchased in the Hellenic acquisition had a reliably measured fair value of €2,000? Later, if in 2014 the company determined that the fair value of the Hellenic goodwill was \(€ 3,000\), how would its balance sheet and income statement be affected?

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(millions of ) Cash and cash equivalents Non-current assets held for sale Other assets.... Current assets. Intangible assets Goodwill.... Property, plant, and equipment Other assets.. ***** Non-current assets. Assets.... Fair Value at Acquisition Date 1,558 195 1,716 3,469 5,348 2,500 6,965 823 15,636 19,105 Carrying Amounts Immediately Prior to Acquisition 1,558 158 1,716 3,432 4,734 3,835 5,581 782 14,932 18,364