Specify the requirements by IFRS

Clear pictures of the question

CASES Case 8-1 LO3 On December 31, Year 7, Pepper Company, a public company, agreed to a business combination with Salt Limited, an unrelated private company. Pepper issued 82 of its common shares for all 50 of the outstanding common shares Salt. This transaction increased the number of outstanding Pepper shares from 100 to 182. Pepper's shares were 475 ancesto trading at around $20 per share in days leadine up to the business combination. The condensed bale two companies on this date were as follows: Pepper Salt Carrware Amount C Am Fair Vol $1,000 Tangible assets Intangible assets (excluding goodwill) Fair Value $1.200 1,000 400 $1.400 5800 600 820 $200 500 $700 $340 360 S700 Liabilities Shareholders' equity $1.400 arty for $1.000 party was willing $1.640. Accord the true valve counting implio Un January 1. Year 8. Pepper sold 40% of its investment in Salt to an unrelated third party for cash. The CFO at Pepper stated that Salt must have been worth $2,500 if the unrelated third party wa to pay $1,000 for a 40% interest in Salt. If so, Pepper saved $860 by buying Salt for only $1,640 ingly, the CFO wants to recognize a gain of $860 in the Year 7 income statement to reflect the true va the Salt shares. You have been asked by the CFO to prepare a presentation to senior management on the accountine im tions for the business combination and subsequent sale of 40% of the investment. She would like you to con two alternative methods of valuing Salt on the consolidated balance at the date of acquisition-one based on purchase and one based on the implied value of the subsidiary based on the sales price on January 1, Year 8 Required Prepare this presentation, answering the following questions: (a) How would Pepper's consolidated balance sheet differ at the date of acquisition under the two different valuate alternatives? Which method best reflects economic reality? Which method is required by GAAP? b) How would Pepper's consolidated balance sheet look after the sale of the 40% interest in Salt to the unrelated third party under the two alternatives? Case 8-1 LO3 On December 31. Year 7. Pepper Company, a public company, agreed to a business combination with Salt Limited. an unrelated private company, Pepper issued 82 of its common shares for all 50 of the outstanding common shares of Salt. This transaction increased the number of outstanding Pepper shares from 100 to 182. Pepper's shares were 475 trading at around $20 per share in days leading up to the business combination. The condensed balance sheets for the two companies on this date were as follows: Pepper Carrying Amount $1.000 400 $1,400 Salt Carrying Amount $200 Fair Value $1.200 1.000 Fair Value 5240 Tangible assets Intangible assets (excluding goodwill) 300 $700 $340 S800 820 Liabilities Shareholders' equiry $1,400 $700 On January 1. Year 8. Pepper sold 40% of its investment in Salt to an unrelated third party for S1.000 in cash. The CFO at Pepper stated that Salt must have been worth $2.500 if the unrelated third party was willing to pay $1,000 for a 40% interest in Salt. If so, Pepper saved 5800 by buying Salt for only $1,640. Accord ingly, the CFO wants to recognize a pain of S860 in the Year 7 income statement to reflect the true value of the Salt shares. You have been asked by the CFO to prepare a presentation to senior management on the accounting implica Lions for the business combination and subsequent sale of 40% of the investment. She would like you to consider two alternative methods of valuing Salt on the consolidated balance at the date of acquisition-one based on cost of purchase and one based on the implied value of the subsidiary based on the sales price on January 1. Year 8. Required Prepare this presentation, answering the following questions: (a) How would Pepper's consolidated balance sheet differ at the date of acquisition under the two different valuation alternatives? Which method best reflects economic reality? Which method is required by GAAP th) How would Pepper's consolidated balance sheet look after the sale of the 40% interest in Salt to the unrelated third party under the two alternatives! CASES Case 8-1 LO3 On December 31, Year 7, Pepper Company, a public company, agreed to a business combination with Salt Limited, an unrelated private company. Pepper issued 82 of its common shares for all 50 of the outstanding common shares Salt. This transaction increased the number of outstanding Pepper shares from 100 to 182. Pepper's shares were 475 ancesto trading at around $20 per share in days leadine up to the business combination. The condensed bale two companies on this date were as follows: Pepper Salt Carrware Amount C Am Fair Vol $1,000 Tangible assets Intangible assets (excluding goodwill) Fair Value $1.200 1,000 400 $1.400 5800 600 820 $200 500 $700 $340 360 S700 Liabilities Shareholders' equity $1.400 arty for $1.000 party was willing $1.640. Accord the true valve counting implio Un January 1. Year 8. Pepper sold 40% of its investment in Salt to an unrelated third party for cash. The CFO at Pepper stated that Salt must have been worth $2,500 if the unrelated third party wa to pay $1,000 for a 40% interest in Salt. If so, Pepper saved $860 by buying Salt for only $1,640 ingly, the CFO wants to recognize a gain of $860 in the Year 7 income statement to reflect the true va the Salt shares. You have been asked by the CFO to prepare a presentation to senior management on the accountine im tions for the business combination and subsequent sale of 40% of the investment. She would like you to con two alternative methods of valuing Salt on the consolidated balance at the date of acquisition-one based on purchase and one based on the implied value of the subsidiary based on the sales price on January 1, Year 8 Required Prepare this presentation, answering the following questions: (a) How would Pepper's consolidated balance sheet differ at the date of acquisition under the two different valuate alternatives? Which method best reflects economic reality? Which method is required by GAAP? b) How would Pepper's consolidated balance sheet look after the sale of the 40% interest in Salt to the unrelated third party under the two alternatives? Case 8-1 LO3 On December 31. Year 7. Pepper Company, a public company, agreed to a business combination with Salt Limited. an unrelated private company, Pepper issued 82 of its common shares for all 50 of the outstanding common shares of Salt. This transaction increased the number of outstanding Pepper shares from 100 to 182. Pepper's shares were 475 trading at around $20 per share in days leading up to the business combination. The condensed balance sheets for the two companies on this date were as follows: Pepper Carrying Amount $1.000 400 $1,400 Salt Carrying Amount $200 Fair Value $1.200 1.000 Fair Value 5240 Tangible assets Intangible assets (excluding goodwill) 300 $700 $340 S800 820 Liabilities Shareholders' equiry $1,400 $700 On January 1. Year 8. Pepper sold 40% of its investment in Salt to an unrelated third party for S1.000 in cash. The CFO at Pepper stated that Salt must have been worth $2.500 if the unrelated third party was willing to pay $1,000 for a 40% interest in Salt. If so, Pepper saved 5800 by buying Salt for only $1,640. Accord ingly, the CFO wants to recognize a pain of S860 in the Year 7 income statement to reflect the true value of the Salt shares. You have been asked by the CFO to prepare a presentation to senior management on the accounting implica Lions for the business combination and subsequent sale of 40% of the investment. She would like you to consider two alternative methods of valuing Salt on the consolidated balance at the date of acquisition-one based on cost of purchase and one based on the implied value of the subsidiary based on the sales price on January 1. Year 8. Required Prepare this presentation, answering the following questions: (a) How would Pepper's consolidated balance sheet differ at the date of acquisition under the two different valuation alternatives? Which method best reflects economic reality? Which method is required by GAAP th) How would Pepper's consolidated balance sheet look after the sale of the 40% interest in Salt to the unrelated third party under the two alternatives