Reference no: EM132775876

The consolidated financial statements incorporate the financial statements of Techniq plc and subsidiaries controlled by Techniq plc. The results and assets and liabilities of associates and joint ventures are incorporated in the consolidated financial statements using the equity method of accounting. Acquisitions of subsidiaries are accounted for using the acquisition method. When the Group completes a business combination, the fair values of the identifiable assets and liabilities acquired, including intangible assets, are recognised. The determination of the fair values of acquired assets and liabilities is based, to a considerable extent, on management's judgement. If the purchase consideration exceeds the fair value of the net assets acquired then the incremental amount paid is recognised as goodwill. If the purchase price consideration is lower than the fair value of the assets acquired then the difference is recorded as a gain in the statement of profit or loss. The interest of the non-controlling shareholders in an acquisition may initially be measured either at fair value or at the non-controlling shareholders' proportion of the net fair value of the identifiable assets acquired, liabilities and contingent liabilities assumed. The choice of measurement basis is made on an acquisition-by-acquisition basis.

Problem 1: Explain the accounting treatment and classification of goodwill arising on acquisition.