ONYALtd (ONYA) is a cloud based business management solutions provider. First listed on the Australian Securities Exchange (ASX) in 2014, ONYA recorded a healthy annual profit in the last financial year, boosted by increased online subscriber growth.

At ONYA's January 2018 board meeting CEO James Dunn outlined details of a recent new acquisition. The acquisition is an Australian company, Remit Pty Ltd (Remit), which is an Australian payments solutions provider. Remit has more than 8,000 clients across Australia, including banks and businesses of various sizes. The acquisition of Remit will allow ONYA to bridge a gap between its accounting and payments solutions and will potentially open up an $400 million accounting software payment market to ONYA. The acquisition was via a sale and purchase agreement to acquire 100% of Remit for $40 million cash.

The ONYA board were generally positive about the acquisition and much of the boardroom discussion focused on the valueadd of Remit to ONYA's existing business. However, several of ONYA's directors expressed concern about the nature and amount of the assets involved in the Remit acquisition as the most recent financial statements for Remit indicated that ONYA was paying $40 million for net assets with a carrying value of just over $4 million.

ONYA's CFO Wendy Patton was asked about this issue and about the impact of the acquisition on ONYA's financial statements. Wendy replied that Remit controlled significant intangible assets that it was not permitted to recognize in its own financial statements but that the ONYA Group should recognize in a business combination. Wendy agreed to provide proforma (projected) financial statements and supporting calculations to the board to demonstrate the estimated effect of the Remit acquisition.

You commenced working at ONYA as a graduate accountant a year ago. After the board meeting,

Wendy Patton sends for you and asks that you help to prepare detailed responses for the board. Wendy provides you with some data and the most recent Statements of Financial Position for ONYA and for Remit. The following information is also relevant:

• ONYA is the ultimate parent of a preexisting group at 1 January 2018.
• Remit is not a member of a group.
• ONYA and its subsidiaries have not adopted tax consolidation.
• There are no intragroup sales or dividends.
• Both the ONYA Group and Remit have a 31 December financial year end.
• Remit's recorded net assets are stated at fair value.
• Assume that the financial statement excerpts provided are reasonable estimates of the acquisition date financial statements of both companies just prior to the acquisition.
• Initial due diligence undertaken by ONYA indicates that in addition to the recorded assets and liabilities, Remit also controls the following unrecognized identifiable intangible assets:
  1. Customer relationships with an estimated fair value at 1 January 2018 of $12,400,000. Estimated economic life is 10 years.
  2. Commercialized software with an estimated fair value at 1 January 2018 of $5,333,333. Estimated economic life is 5 years.
  3. Brand name (Remit) with an estimated fair value at 1 January 2018 of $1,600,000. Estimated economic life is 5 years.
• The corporate tax rate is 30%.

Required:

1. ONYA acquired Remit for $40 million cash on 1 January 2018. Using the information provided, prepare an acquisition analysis clearly showing the amount of goodwill arising on the acquisition. Where relevant you should refer to Australian Accounting Standards and/or relevant professional guidance or research literature.
2. Briefly discuss the initial recognition and subsequent accounting treatment of the intangible assets, including goodwill, acquired by ONYA in the Remit acquisition. Where relevant you should refer to Australian Accounting Standards and/or relevant professional guidance or research literature.
3. Prepare in good form a consolidated Statement of Financial Position for the ONYA Group including Remit, at 1 January 2018 (immediately after the acquisition).
4. Prepare a report to Wendy Patton that summarizes the effect of the acquisition on the

ONYA Group and recommends the accounting treatment for the Remit net assets acquired. You should briefly refer to relevant accounting standards to support your overall recommendations.

Parameters:

• Limit of 2,000 words. Supporting workings such as a consolidation spreadsheet can be placed in an appendix and won't count towards the word limit. You should show your acquisition analysis in the body of your case study response to part (a).
• Your case study response should be properly referenced with a correctly formatted bibliography. You might find the following link helpful https://www.utas.edu.au/accountingcommunication-matters/writing-an-essay-or-report/referencing/accounting-standards
• This case study is worth 20% of your total assessment for ACCT7104. Marks will be allocated according to the rubric provided.

Statements of Financial Position:

ONYA Ltd Group

Consolidated Statement of Financial Position as at 31 December 2017

Current Assets:	($000)
Cash and cash equivalents	71,432
Trade and other receivables	14,566
Inventories	216
Total Current Assets	86,214
NonCurrent Assets:
Receivables	2,398
Equity accounted investments	7,664
Property, plant and equipment (net)	18,776
Intangible assets	1,164,322
Total NonCurrent Assets	1,193,160
Total Assets	1,279,374
Current Liabilities:
Trade and other payables	19,688
Borrowings	488
Unearned revenue	52,344
Provisions	13,221
Total Current Liabilities	85,741
NonCurrent Liabilities:
Borrowings	501,450
Provisions	12,965
Total NonCurrent Liabilities	514,415
Total Liabilities	600,156
Net Assets	679,218
Shareholders' Equity:
Issued capital	1,008,100
Retained profits	(380,382)
General reserve	51,500
Total Shareholders' Equity	679,218

Remit Pty Ltd

Statement of Financial Position as at 31 December 2017

Current Assets:	($000)
Cash and cash equivalents	4,282
Accounts Receivable	1,700
Prepayments	1,000
Total Current Assets	6,982
NonCurrent Assets:
Property, Plant and equipment (net)	127
Total NonCurrent Assets	127
Total Assets	7,109
Current Liabilities:
Accounts payable	2,340
Tax payable	620
Total Current Liabilities	2,960
Total Liabilities	2,960
Net Assets	4,149
Shareholders' Equity:
Issued capital	2,000
Retained profits	1,629
General reserve	520
Total Shareholders' Equity	4,149