Assume that Company A acquires 70 per cent of Company B for a cash price of $14 million when the share capital and reserves of Company B are:

Share capital $8 million

Retained earnings $2 million

$10 million

(a)What amount of goodwill will be shown in the consolidated statement of financial position pursuant to AASB 3 assuming that any non-controlling interest in the acquirer is measured at fair value?

(b)What amount of goodwill will be shown in the consolidated statement of financial position pursuant to AASB 3 assuming that any non-controlling interest in the acquirer is measured at the non-controlling interest's proportionate share of the acquiree's identifiable net assets?

(c)Pass the necessary consolidation journal entries and the journal entries to record the non-controlling interest if the non-controlling interest in the acquirer is measured at the non-controlling interest's proportionate share of the acquiree's identifiable net assets.

(d)What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation?