Question 1

Section B - Case 1

Scenario: GlobalTech PLC acquired 80% of CloudServe Ltd on 1 July 20X5. Year-end is 31 December 20X5. GlobalTech paid $5m cash and issued 1m shares (market value $2 each). CloudServe's net assets at acquisition were $6m. Fair value of NCI at acquisition was $1.5m. Post-acquisition, CloudServe sold goods to GlobalTech for $1m at a 25% mark-up on cost. Half of these goods remain in inventory at year-end. CloudServe's profit for the full year was $800k (accruing evenly).

Calculate the total consideration transferred by GlobalTech PLC for the acquisition of CloudServe Ltd (in $ millions).

Accepted Answer

Add the cash paid to the fair value of the shares issued. Cash = $5m. Shares = 1m shares * $2 = $2m. Total = $5m + $2m = $7m.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to include the share issue or valuing shares at nominal value instead of market value.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

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