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Question 1 (29 marks) Few weeks ago, Best Choice Company has completed the acquisition of 60% of ordinary shareholding of its major competitor, Wonderful Company.

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Question 1 (29 marks) Few weeks ago, Best Choice Company has completed the acquisition of 60% of ordinary shareholding of its major competitor, Wonderful Company. Control over Wonderful Company obtained after the acquisition. In the celebration banquet, Mr. John Lee, the Chief Executive Officer (CEO) of Best Choice Company was very excited about the acquisition because he believes the company has "killed" the competitor through the control over Wonderful Company. He believes the elimination of threat from Wonderful company will allow the company setting a higher price on its products in future which will improve the profit and hence Return on Equity (RoE). Over the past year, Mr. John Lee has been under high pressure because the major shareholder of Best Choice company, Mr. Ray Wong, is very eager to have a higher Return on Equity (RoE) and he always demands Mr. John Lee to improve the Return on Equity. This morning Mr. John Lee approaches you on recommendation about how to measure the interests of other shareholders (non-controlling interests) of Wonderful company in the consolidated financial statements. Required: a) HKFRS 3 allows TWO options to measure non-controlling interests (NCI) at acquisition date, explain to Mr. John Lee the two options. (5 marks) b) Advise Mr. John Lee which option you would recommend and provide detailed arguments for the choice. (24 marks)

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