Part A

Parent Ltd acquired 70% of the equity in Subsidiary Ltd on 1 April 2002 for $650 000. At that date the equity of Subsidiary Ltd comprised:

Share capital

$380 000

Retained earnings

200 000

Because Subsidiary Ltd used the cost model for its recognised property, plant and equipment, it had several items whose book value was lower than fair value. The book value of these assets was $330 000 and the fair value of these assets, at the date of acquisition, was

$420 000. At the date of acquisition, Subsidiary Ltd had an unrecognised intangible asset with a fair value of $178 000 and a contingent liability of $35 000.

Required:

(a) Prepare the notional journal entry, as at 1 April 2002 or at 31 March 2018, to eliminate the Parent Ltd asset Investment in Subsidiary Ltd and to eliminate the parents portion of equity in the Subsidiary Ltd, in accordance with NZ IFRS 10 Consolidated Financial Statements and NZ IFRS 3 Business Combinations.

Note: Your workings must be included on each line of your notional journal entry.

(b) Prepare the notional journal entry at 1 April 2002 to identify the non-controlling interest (NCI), in Subsidiary Ltd, to be reported in the group accounts in accordance with

NZ IFRS 10 Consolidated Financial Statements and NZ IFRS 3 Business Combinations. The directors of Parent Ltd require the NCI in Subsidiary Ltd to be measured at fair value.

Note: Your workings must be included on each line of your notional journal entry.

(c) Prepare a 100% acquisition analysis to prove your goodwill answers in (a) and (b) above.

Part B

Parent Ltd acquired equity in Subsidiary Ltd on 1 April 2007. At that date, the identifiable net assets were considered to be fairly valued and the equity of Subsidiary Ltd comprised:

Share capital

$370 000

Retained earnings

160 000

Asset revaluation surplus

25 000

$ 555 000

Parent Ltd has requested your help in the preparation of their consolidated financial statements for the financial year ended 31 March 2018 and has provided you with the following information: