ExpertEasy2 marksMultiple Choice
ACCA · Question 13 · Preparation of Consolidated Financial Statements
SECTION A
Omega Group acquired 80% of the share capital of Sigma Ltd for $4,000,000. At the acquisition date, the fair value of Sigma's identifiable net assets was $3,500,000. Omega chooses to measure the Non-Controlling Interest (NCI) at fair value, which was determined to be $900,000 at the acquisition date.
What is the amount of goodwill arising on acquisition under IFRS 3 Business Combinations?
SECTION A
Omega Group acquired 80% of the share capital of Sigma Ltd for $4,000,000. At the acquisition date, the fair value of Sigma's identifiable net assets was $3,500,000. Omega chooses to measure the Non-Controlling Interest (NCI) at fair value, which was determined to be $900,000 at the acquisition date.
What is the amount of goodwill arising on acquisition under IFRS 3 Business Combinations?
Answer options:
A.
$1,200,000
B.
$1,400,000
C.
$500,000
D.
$4,900,000
How to approach this question
Use the goodwill formula: Consideration Transferred + NCI at acquisition - Fair Value of Identifiable Net Assets.
Full Answer
B.$1,400,000✓ Correct
Under IFRS 3, when NCI is measured at fair value (the full goodwill method), Goodwill = Consideration transferred + Fair value of NCI - Fair value of identifiable net assets.
Goodwill = $4,000,000 + $900,000 - $3,500,000 = $1,400,000.
Common mistakes
Calculating NCI as 20% of net assets ($700,000) despite the question stating the fair value method is used.
Practice the full ACCA FR — Financial Reporting Practice Exam 3
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