Question
a) A subsidiary sold its fixed assets to its parent and recognised a loss on sale in the previous year. Assume the loss is not
a) A subsidiary sold its fixed assets to its parent and recognised a loss on sale in the previous year. Assume the loss is not indicative of an impairment loss.
Required: Discuss the impact of this transaction on retained earnings, fixed assets and subsequent depreciation when preparing the consolidation adjustment for the current year.(3 marks)
b) HKFRS 3 (Revised) Business Combinations requires that the non-controlling interests in the acquiree at acquisition date is measured either i) at fair value or ii) the non-controlling interests proportionate share of the acquirees identifiable net assets.
Required: Discuss and compare the impact of each method on net profit after tax and total assets. (4 marks)
c) Discuss why sellers and buyers would like to include a contingent consideration in business combinations. (3 marks)
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