(a) Discuss whether the transaction between Wimbledon Ltd and Roland Garros Ltd complies to the definition of

a “business combination” in terms of IFRS 3 Marks

IFRS 2 defines a business combination as a transaction or other event in which an acquirer obtains control of one or more
businesses 1

Wimbledon obtains control over Roland Garros as its purchasing 75% of the share capital of Roland Garros. This means
they have a significant share in Roland Garros and will be able to affect those returns through this significant share 1

A Business in IFRS 3 is defined (revised) as a integrated set of activities (inputs, processes and outputs) and assets
capable to provide returns to investors 1

Roland Garros is a business as it has an integrated set of activities as it has

- Appropriate Inputs (over 100 employees, owns assets that manufactures equipment) 1
- Process enablers (ability to manufacture and create outputs) 1
- Outputs (evidenced by the profits made over the last number of years) 1

As Wimbledon is obtaining control and Roland Garros is a business, this transaction satisfies the definition of a business
combination in terms of IFRS 3 1

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(b) Calculate the goodwill arising from Wimbledon Ltd’s acquisition of Roland
Garros Ltd on the acquisition date as it would appear in the consolidated
financial statements of Wimbledon Ltd Marks

Goodwill = Total Net Assets LESS %NCI LESS Consideration

Included in
Consideration N$ consideration

Cash payable 1 April 2013 600,000 600,000 1

Cash payable 31 March 2014 275,000 250,000 (n=1; FV=275 000; i=10; comp PV=250 000) 2
Shares (20000*N$12) 240,000 240,000 1.5
Contingent Payment 280,000 280,000 1
Lawyers Fees 50,000 - Have to eliminate @ consolidation 1
1,445,000 1,370,000

Total Net Assets

Share Capital 1,000,000 1

Retained Earnings 531,250 460 000 + (285 000/12 x 3) 2.5
Revaluation Surplus (Land) 250,000 1
Intangible Asset 102,000 150 000 x (100%-32%) 1.5
Contingent Liability - 156,400 230 000 x (100%-32%) 1.5
1,726,850

NCI @ Fair Value 400,000 1

Goodwill 43,150 1 p

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Tax 32.00% 68.00%

ANALYSIS IN ROLAND GARROS

WIMBLEDON LTD
AT ACQUISITION Total 75% NCI@25%
AT SINCE
Share Capital 1,000,000 750,000 250,000
Retained Earnings 531,250 398,438 132,813
Revaluation Surplus (Land) 250,000 187,500 62,500
Revaluation Surplus (Intangible Asset) 102,000 76,500 25,500
Retained Earning (Contingent Liability) - 156,400 - 117,300 - 39,100

1,726,850 1,295,138 431,713

Goodwill 43,150 74,863 - 31,713
Consideration 1,770,000 1,370,000 400,000