On 1 April 2018, Prolight acquired 18,000 out of 24,000 equity share capital of Spotlight. For acquisition of Spotlight, Prolight made an immediate cash payment of only MUR 1-40 per share. In addition, Prolight will pay a further amount of MUR 5 million in cash on 30 September 2018 if Spotlight returns to profitability by that date. At the date of acquisition shares in Spotlight had a listed market price of MUR 1.30 each. Retained earnings as at 30 September 2017 was 12 million for Spotlight. Below are the summarised draft income statement of both companies. Statements of profit or loss for the year ended 30 September 2018. Prolight MUR 000 Revenue Cost of sales Gross profit (loss) Distribution costs Administrative expenses Finance costs Profit (loss) before tax Income tax (expense)/relief Profit (loss) for the year 165,000 (132,000) 33,000 (4,500) (7,875) (375) 20,250 (5,250) 15,000 Spotlight MUR 000 99,000 (100,800) (1,800) (3,000) (3,600) Nil (8,400) 1,500 (6,900) The following information is relevant: (i) (ii) (a) (iv) All items in the above statements of profit or loss are deemed to accrue evenly over the year unless otherwise indicated. (b) At the date of acquisition, the fair values of Spotlight's assets were equal to their carrying amounts with the exception of a plant. This had a fair value of MUR 3 million above its carrying amount and a remaining lease term of 10 years at that date. All depreciation is included in cost of sales. REQUIRED (c) Prolight's policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, Spotlight's share price at that date can be deemed to be representative of the fair value of the shares held by the non- controlling interest. (d) Prolight transferred raw materials amounting MUR 4.2 million at a markup of 20% to Spotlight in June 2018. At 30 September 2018 Spotlight have half of these raw materials still in inventory. There were no other intra-group sales. Calculate the goodwill arising on the acquisition of Spotlight at 1 April 2018. [9 marks] Explain how Prolight should account for its goodwill arising from purchase of Spotlight. [7 marks] Prepare the consolidated statement of profit or loss for Prolight for the year ended 30 September 2018. [20 marks] Explain the accounting treatment for investment in associate as defined by IAS 28.