Additional information: (a) Parent paid $1,000,000 for an 80% stake in Subsidiary on 31 December 20x0. Fair value of non- controlling interests was $250,000 at acquisition date that was proportional to the consideration transferred by Parent Co. (b) On 31 December 20xl, total goodwill was assessed to be impaired to the extent of $50,000. (c) There were no intragroup transactions other than Parent Co's investment in Subsidiary Co and dividends declared by S Co. (d) Information relating to "undervalued" and "overvalued" identifiable assets is as follows: (i) Remaining useful life of undervalued fixed asset as at 31 December 20x0 was ten years. (ii) Undervalued inventory was sold in 20x1. (ii) Overvalued accounts receivable was written down for a potential bad debt. The debt was confirmed bad in 20x1 and written off in Subsidiary's books in 20xl. (e) Assume a tax rate of 20%. Recognize tax effects on fair value adjustments. Required: 1. What is the goodwill arising from the application of the requirements of IFRS 3 Business Combinations? 2. Prepare the consolidation adjustments for the year ended 31 December 20x1. 3. Perform an analytical check on the non-controlling interests balance as at 31 December 20xl. 4. Show the consolidation adjustments that need to be passed in 20x2 to re-enact the consolidation adjustments of 20x1. 5. Prepare the consolidated income statement for the year ended 31 December 20x1. P4.3 Consolidation and analytical check on non-controlling inter by Parent Co, and income statements for Parent Co and Subsidiary Co for the year ended 31 December The statement of financial position of Subsidiary Co as at 31 December 20x0, the date it was acquired 20xl are shown below: Subsidiary Co Statement of Financial Position As at 31 December 20x0 (date of acquisition) Book value $600,000 Fair value $750,000 Fixed assets, net. Current assets Inventory... Accounts receivable. Cash 40,000 100,000 20,000 $160,000 50,000 70,000 20,000 $140,000 Less current liabilities: Accounts payable. Short-term loans. $ 80,000 110,000 $190,000 (30,000) $570,000 $ 80,000 110,000 $190,000 (50,000) $700,000 Net current assets/liabilities... Shareholders' equity: Share capital ..... Retained earnings. $320,000 250,000 $570,000 $700,000 Income Statement and Partial Statement of Changes in Equity For Year Ended 31 December 20x1 Net profit before tax (including dividend income) Less tax expense Net profit after tax Less dividends declared Profit retained for the year.. Retained earnings, 1 January Retained earnings, 31 December Parent Co $ 550,000 110,000 $ 440,000 100,000 $ 340,000 1,000,000 $1,340,000 Subsidiary Co $100,000 20,000 $ 80,000 24,000 $ 56,000 250,000 $306,000
