Mr Kao is a qualified accountant but obtained his qualification some years ago. He has heard that accounting for changes in group structures is somewhat different to what it used to be. "It all used to be very straightforward. Each acquisition attracted a bit more goodwill. There was an extra purchase and so more goodwill was bought as each purchase was of a bit more of the business. Obviously, the cost of the advisor's fees would be included in this calculation as it is a cost of the purchase. I can't see how things can be that different now." Required: (a) Explain to Mr Kao how the purchase of an extra 20% stake in an entity, when the group already holds 60%, is now accounted for under SFRS(I) 3. (b) Explain to Mr Kao how a decrease in ownership from 80% to 60% should be accounted for and why. (c)Mr Kao is still confused and doesn't understand how this would be applied when an entity holds an associate and then increases its holding to one of a subsidiary. "I'm not sure I understand this yet. When I hold 40% of an entity there is goodwill included as part of the associate; does that mean I do exactly the same thing for a purchase which takes my holding from 40% to 60%?" Explain the rules to Mr Kao