The following information is relevant(ADJUSTMENT): 1)The fair value of Danute’s net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group depreciation policy is to charge depreciation on a proportionate basis and should be included in cost of sales. No adjustment was made for this in Danute’s financial statements. 2)Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute’s land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation). 3)On 1 July 2015, Ausra transferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer. 5)Ausra’s policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million. Calculate the goodwill arising on aquisition.
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows:
Statement of Comprehensive Income for the year ended 31 December 2015
|
|
Ausra |
Danute |
|
|
$ 000 |
$ 000 |
|
Revenue |
120,000 |
48,000 |
|
Cost of sales |
(84,000) |
(40,000) |
|
Gross profit |
36,000 |
8,000 |
|
Operating expenses |
(11,900) |
(400) |
|
Profit from operations |
24,100 |
7,600 |
|
Other income |
300 |
- |
|
Finance costs |
- |
(1,200) |
|
Profit before tax |
24,400 |
6,400 |
|
Income tax expense |
(6,000) |
(1,200) |
|
Profit for the year |
18,400 |
5,200 |
|
|
|
|
|
|
Ausra |
Danute |
|
|
$ 000 |
$ 000 |
|
Non-current assets: |
|
|
|
Property, plant and equipment |
38,640 |
16,000 |
|
Investments |
16,280 |
- |
|
|
54,920 |
16,000 |
|
Current assets |
|
|
|
Inventory |
11,240 |
6,450 |
|
Receivables |
13,600 |
7,355 |
|
Bank |
5,160 |
2,195 |
|
|
30,000 |
16,000 |
|
Total Assets |
84,920 |
32,000 |
|
Equity and liabilities |
|
|
|
Ordinary shares of $1 each |
40,000 |
4,000 |
|
|
17,720 |
8,800 |
|
Revaluation reserve |
7,200 |
- |
|
|
64,920 |
12,800 |
|
Non-current liabilities |
|
|
|
10% loan notes |
- |
10,000 |
|
Current Liabilities |
20,000 |
9,200 |
|
|
|
|
|
Total Equity and Liabilities |
84,920 |
32,000 |
The following information is relevant(ADJUSTMENT):
1)The fair value of Danute’s net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group
2)Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute’s land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation).
3)On 1 July 2015, Ausra transferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer.
5)Ausra’s policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million.
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