Question
Subsidiary and Business Combinations Lee and Fun Corporation is listed on the Hong Kong Stock Exchange and is the Hong Kong headquartered multinational group and
Subsidiary and Business Combinations
Lee and Fun Corporation is listed on the Hong Kong Stock Exchange and is the Hong Kong headquartered multinational group and recognized as the worlds leader in consumer goods design, development, sourcing, and distribution. The company specializes in supply chain management of high-volume, time-sensitive goods for leading retailers and brands worldwide via an extensive global network. Lee and Fun provide sophisticated, one-stop-shop supply chain solutions to meet customers' specific needs. From product design, raw material sourcing and production management to quality control, logistics, shipping and other important functions, its spectrum of services covers the entire supply chain end-to-end. Over the years, Lee and Fun has won numerous industry accolades for its performance, governance and sustainability. The company is committed to the highest operational standards, conducting its business with integrity and good corporate governance practices with an emphasis on transparency and accountability. Sustainability considerations are embedded into its corporate policies and risk management systems. In the past few years, Lee and Fun has expanded its operation by acquiring business from different vendors in order to have vertical integration and better enhance its efficiency. The director, Mr Ricky Lee, is proposing Lee and Fun to acquire 70% interest in another business at $35 million. Lee and Fun is currently holding 20% interest on the business (carrying amount at $2 million) and the estimated fair value of the net identifiable assets of the business is $30 million. Ricky considered that the accounting rule requires all considerations to purchase a business are to be recorded at fair value at the acquisition date, but are not sure the accounting treatment on contingent consideration and goodwill.
Required: In respect of Rickys proposed acquisition of the new business, explain the accounting treatment of
a) non-controlling interests,
b) goodwill, and
c) contingent consideration.
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