nsaction 2

InvestCo Ltd obtained a 15% interest in Bull (Pty) Ltd on 31 January 2016 for R1 480 000. Bull (Pty)

Ltd is a transport company in the food sector. The company transports fresh food products around

the country in 18wheeler trucks. The fair value and carrying amount of the investment was R1 280

000 at 30 June 2019. On 30 June 2020, the accountant of InvestCo Ltd calculated the fair value of

the investment in Bull (Pty) Ltd using adjusted aftertax earnings yield of 16% before considering a

private company risk premium of 4%.

Beforetax earnings of R8 400 400 included a onceoff insurance payment of R12 500 000 from a

freak explosion, caused when one of the 18wheeler trucks' fuel tanks exploded and damaged the

other four trucks that were in the parking lot at that time. The five trucks had a carrying value of

R1 500 000 million each at the time of the explosion. Earnings are expected to grow by a minimum

of 5% into the foreseeable future.

The tax rate is 28%.

This investment was designated as measured at fair value through other comprehensive income.