ACCA · Question 31 · Consolidated Financial Statements

SECTION C

Nexus Holdings Co acquired 80% of the equity share capital of CyberDyne Co on 1 January 20X6. The consideration consisted of cash of $5,000,000 and the issue of 1 million shares in Nexus Holdings. The market value of Nexus shares on 1 January 20X6 was $3.50 per share.

At the date of acquisition, the retained earnings of CyberDyne were $2,500,000 and its share capital was $1,000,000. The fair value of CyberDyne's identifiable net assets was equal to their carrying amounts, with the exception of a specialized patent which had a fair value $600,000 in excess of its carrying amount. The patent had a remaining useful life of 5 years at the acquisition date.

Nexus Holdings measures Non-Controlling Interest (NCI) at fair value. The fair value of the 20% NCI at 1 January 20X6 was $1,800,000.

During the year ended 31 December 20X6, CyberDyne sold goods to Nexus Holdings for $800,000 at a margin of 20%. Half of these goods remained in Nexus Holdings' inventory at the year-end.

Goodwill was tested for impairment at 31 December 20X6 and was found to be impaired by 10%.

Draft the calculation for the following items as they would appear in the Consolidated Statement of Financial Position of Nexus Group as at 31 December 20X6:

1. Goodwill
2. Provision for Unrealized Profit (PUP)
3. The fair value adjustment and its subsequent amortization

Show all workings clearly.