Consolidated statement of financial position (Pine Group)
Questions are in English, the exam language. Companies and figures are invented for practice.
On 1 October 20X8 Pine Co acquired 80% of Spruce Co's equity shares. The consideration was $2,000,000 in cash plus contingent consideration with a fair value of $300,000 at the acquisition date. By 30 September 20X9 the fair value of the contingent consideration had risen to $350,000 because of post-acquisition events; Pine has not recorded this change.
At acquisition Spruce's share capital was $1,000,000 and its retained earnings were $800,000. The fair value of Spruce's plant exceeded its carrying amount by $200,000; the plant had a remaining life of 4 years. The NCI is measured at fair value, $520,000 at acquisition.
At 30 September 20X9 goodwill is impaired by 10%. During the year Pine sold goods to Spruce for $120,000 at a gross margin of 25%; Spruce still holds one third of them.
| At 30 September 20X9 | Pine Co | Spruce Co |
|---|---|---|
| Retained earnings | $3,000,000 | $1,100,000 |
- (a) Goodwill at the acquisition date ($)3 marks
- (b) Goodwill at 30 September 20X9 ($)2 marks
- (c) Spruce's post-acquisition profit after the fair value adjustment ($)2 marks
- (d) Non-controlling interest at 30 September 20X9 ($)3 marks
- (e) Consolidated retained earnings at 30 September 20X9 ($)4 marks
- (f) Explain the treatment of (i) the change in the fair value of the contingent consideration and (ii) the fair value adjustment to Spruce's plant.6 marks