Question 1

Section B - Case 3: BioHealth Holdings

BioHealth's retained earnings at 31 December 20X8 were $14,000,000. MedTech's retained earnings at acquisition were $4,000,000 and at 31 December 20X8 were $5,200,000. BioHealth sold goods to MedTech resulting in a PURP of $40,000. An impairment review at year-end determined that goodwill had been impaired by $100,000. (NCI is valued at fair value).

What is the Consolidated Retained Earnings balance as at 31 December 20X8?

Accepted Answer

Start with Parent's RE. Add Parent's share of Sub's post-acquisition RE. Deduct PURP (since Parent is the seller). Deduct Parent's share of goodwill impairment (since NCI is at fair value, impairment is split).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Deducting 100% of the goodwill impairment from the parent's retained earnings when the fair value method is used for NCI.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 6

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