AAU-School of Commerce - Advanced Financial Accounting (AcFn3151) Worksheet on Ch4

ADDIS ABABA UNIVERSITY

COLLEGE OF BUSINESS & ECONOMICS
SCHOOL OF COMMERCE
Advanced Financial Accounting (AcFn3151)

Individual Assignment
Submission date: June 2, 2018
WORKSHEET ON CHAPTER 4
(IFRS-3: Business combinations & Good will)
10%
1. Nafyad obtained a 60% holding in the 100,000 $1 shares of Sodere on 1 January 20X9, when
the retained earnings of Sodere were $700,000. Consideration comprised $250,000 cash,
$400,000 payable on 1 January 20X9 and one share in Nafyad for each two shares acquired.
Sodere has a cost of capital of 10% and the market value of its shares on 1 January 20X9 was
$2.30. Nafyad measures non-controlling interest at fair value. The fair value of the non-
controlling interest at 1 January 20X9 was estimated to be $500,000.
What was the goodwill arising on acquisition?

2. Sunny acquired 80% of the 200,000 equity shares of Brand Co., its only subsidiary, on 1
Jan.20X8 when the retained earnings of S were $500,000. The carrying amounts of
Brand Co's net assets at the date of acquisition were equal to their fair values. Sunny
measures non-controlling interest at fair value, based on share price. The market value of
S shares at the date of acquisition was $1.75. At 31 Dece31 20x8 the retained earnings of
Brand were $750,000. At what amount should the NCI appear in the consolidated
statement of financial position of Sunny at 31 December 2008?

3. On 1 Sept 20X7 Diego purchased 20 million of the 25 million $1 equity shares of Heineken.
The acquisition was through a share exchange of two shares in Diego for every three shares
in Heineken. Diego incurred share issue cost $300, 000.
The market price of a share in Diego at 1 September 20X7 was $5.75. Diego will also pay in
cash on 31 August 20X9 (two years after acquisition) $2.42 per acquired share of Heineken.
Diego’s cost of capital is 8% per annum.
a. What is the amount of the consideration attributable to Diego for the acquisition
of Heineken?

b. Assuming NCIs are valued at their proportionate share (PARTIAL VALUE) &
Good will was measured at $20 Million. How much was the FV of net
identifiable assets of Heineken as of Sept 1/2007?
AAU-School of Commerce - Advanced Financial Accounting (AcFn3151) Worksheet on Ch4

c. What is the balance of Share Premium account balance of Diego on the date of
acquisition assumes that Diego has no share premium balance before acquisition.
4. Epharm acquired 80% of Nut’s 200,000 Br. 1 ordinary shares for Br. 800,000 when the
retained earnings of Nuts were Br. 570,000 and the balance in its revaluation surplus was
Br.200, 000. Nut also has an internally developed BRAND NAME which has been
independently valued at Br.100, 000. The non-controlling interest in Nut was measured at
fair value by the date of acquisition.

If the goodwill arising on acquisition is computed at Birr 110,000; what would be the FV of
the NCI at the date of acquisition?

5. Define (and illustrate using examples, when necessary) the following terms from chapter 4:
a. NEGATIVE GOOD WILL
b. RECOVERABLE AMOUNT
c. GOODWILL IMPAIRMENT
d. ACQUISTION METHOD OF ACCOUNTING
e. FULL VALUE METHOD Vs PARTIAL VALUE METHOD
f. CONTROL
g. REVERSE ACQUISITION