Question Below:

Problem 3 (Points 40) On July 8th, 2013 LVMH purchased 80% of Loro Piana (luxury Italian cashmere brand) for $2.8 billion. The fair value of Loro Piana's identifiable assets and liabilities on that date were as follows: Million $ Current Assets 500 Brand 1,500 Fixed Assets 1,000 Liabilities 1,300 The remaining 20% interest remained in Loro Piana family's hands. Part I - Required: 1. LVMH applied the proportionate share method to account for its acquisition of Loro Piana. How much noncontrolling interest and goodwill did LVMH recognize on July 8th, 2013? 2. How would you change your previous answer if LVMH applied the fair value method? At the end of 2015 the book value of Loro Piana had risen to $3.8 billion due to favorable conditions. However, in 2016 Loro Piana suffered a steep decline in sales due to decreased demand of the Asian market. At the end of 2016, LVMH top executives estimated the recoverable amount of Loro Piana to be $2.7 billion. Part II - Required: 3. At what amount should Loro Piana's identifiable net assets and goodwill be reported on LVMH's consolidated financial statements at the end of 2016? Assume that the amount of Loro Piana's goodwill did not change since the acquisition date