Stewart, a public limited company, operates in the retail sector.

On 1 May 2019, Stewart acquired 70% of the equity interest in McDonald, a public limited company. The purchase consideration comprised cash of 94 million. The fair value of the identifiable net assets recognised by McDonald was 120 million excluding the patent below. The identifiable net assets of McDonald included a patent which had a fair value of 4million. This had not been recognised in the financial statements of McDonald. The patent had a remaining useful term of four years to run at the acquisition date. The retained earnings of McDonald were 49million and other components of equity were 3 million at the acquisition date. The remaining excess of the fair value of the net assets is due to an increase in the vlaue of land. The share capital of McDonald was 38million at acquisition and there have been no shares issued since acquisition. The fair value of the non-controlling interest at acquisition was 46 million.

McDonald is located in a foreign country and also operates in the retail sector. The income of McDonald is demoninated in Kealeys. McDonalds sales price is determined by local supply and demand. McDonald pays 40% of its costs in dollars with the remainder being incurred locally and settled in Kealeys. McDonalds management has a considerable degree of autonomy in carrying out the operations of McDonald and is not reliant on the parent.

Required: (a) Discuss and apply the principles to determine the functional currency of McDonald

(b) Calculate the goodwill arising on the acquisition of McDonald

(c) Calculate the fair value adjustment needed to ensure McDonalds assets are recorded at fair value in the group accounts