Question 2 (a) The difference between subsidiaries and associates can be said to revolve around power and control. Critically evaluate this statement, giving examples of when a parent company would consider investing in either a subsidiary or an associate. (b) On 1 January 2022 Expand Plc acquired 90% of the equity share capital of Constant Plc in a share exchange in which Expand Plc issued two new shares for every three shares it acquired in Constant Plc. At the date of acquisition, shares in Expand Plc and Constant Plc had stock market values of 6.50 and 2.50 each, respectively. Statement of Profit and Loss and Other Comprehensive Income for the year ended 30 September 2022

The following information is also relevant: (i)At the date of acquisition, the fair values of Constants assets were equal to their carrying amounts with the exception of an item of plant had a fair value of 1.8 million above its carrying amount. The remaining life of the plant at the date of acquisition was three years. Depreciation is charged to cost of sales. Expand had not incorporated this fair value change into its financial statements for the year ended 30 September 2022.

(ii)Sales from Expand to Constant throughout the year ended 30 September 2022 had consistently been 800,000 per month. Expand made a mark-up on cost of 25% on these sales. Constant had 1.5 million of these goods in inventory as at 30 September 2019. (iii) At the date of acquisition Expand Plc had loaned Constant Plc 5 million at a preferential annual rate of 2%. Both companies had accounted for the interest. (iv) Although Constant Plc has been profitable since its acquisition by Expand Plc, the market for Constant Plcs products has been badly hit in recent months and Expand Plc has calculated the goodwill has been impaired by 2 million as at 30 September 2022. (v) The revaluations in both companies arose at the end of the year. Required: (1) Calculate the consolidated goodwill at the date of acquisition. (2) Prepare the consolidated profit and loss and other comprehensive income for Expand Plc for the year ended 30 September 2022.