Nature of the accounting treatment

Assignment Help Accounting Basics

Reference no: EM131468578 , Length: word count:800

Margaret, a Public limited company, is currently planning to acquire and sell interests in other entities and has as asked for advice on the impact of IFRS3 (Revised) 'Business Combinations' and IAS27 (Revised) 'Consolidated and Separate Financial Statements'. The company is particularly concerned about the -

- impact on earnings,
- net assets and
- Goodwill at the acquisition date and any ongoing earnings impact that the new standards may have.

The Company is considering purchasing additional shares in an associate, Josey, a public limited company. The holding will increase from 30% stake to 70% stake by offering the shareholders of Josey, cash and shares in Margaret. Margarttat it will pay $5 million in transaction costs to lawyers and bankers. Josey had previously been the subject of a management buyout.

In order that the current management shareholders may remain in the business, Margaret is going, to offer them share options in Josey subject to them remaining in employment for two years after the acquisition.

Additionally, Margaret will offer the same shareholders, shares in the holding company which are contingent upon a certain level of profitability being achieved by Josey. Each shareholder will receive shares of the holding company up to a value of $50,000, if Josey achieves a pre-determined rate of return on capital employed for the next two years. Josey has several marketing-related intangible assets that are used primarily in marketing or promotion of its products. These include trade names, Internet domain names and non-competition agreements. These are not currently financial recognised in Josey's statements.

Margaret does not wish to measure the non-controlling interest in subsidiaries on the basis of the proportionate interest in the identifiable net assets, but wishes to use the 'full goodwill' method on the transaction.

Margaret is unsure as to whether this method is mandatory, or what the effects are of recognising ‘full goodwill'. Additionally the company is unsure as to whether the nature of the consideration would affect the calculation of goodwill. To-finance the acquisition of Josey,

Margaret intends to dispose of a partial interest in two subsidiaries. Margaret will retain control of the first subsidiary but will sell the controlling interest in the second subsidiary which will become an associate. Because of its plans to change the overall structure of the business, Margaret wishes to recognise a re-organisation provision at the date of the business combination

You are Required to:

Discuss the principles and the nature of the accounting treatment of the above plans under

International Financial reporting standards setting out any impact that IFRS3 (Revised) ‘Business Combinations' and

IAS (revised) Consolidated and separate financial statement might have on the earning and net assets of the group.

Reference no: EM131468578

Questions Cloud

Run the algorithm developed for a difs : Run the algorithm developed in the previous exercise for a DIFS whose attractor is the Sierpinski gasket. The code is presented in Table.

Examine two ways that companies can recruit qualified job : Determine which method may be most effective and predict how it could benefit the company when hiring new employees.

Discuss influence of parameters in the final geometry : Change the probabilities and some parameters of the codes provided in Table, generate the fractals, and discuss the influence of these parameters in the final.

Determine which hr job positions you would prefer : Propose how you would ensure the HR strategy is in alignment with the business strategy.

Nature of the accounting treatment : Discuss the principles and the nature of the accounting treatment - International Financial reporting standards setting out any impact

Discuss what type of pattern is generated by each codes : Table presents four new codes to generate fractals using RIFS. Discuss what type of pattern is generated by each of these codes. Implement the algorithms.

How did it standardize processes across the firm : Do some research and post an example of either a successful or failed ERP implementation at a major company.

Implement the random midpoint displacement algorithm : Implement the random midpoint displacement algorithm in 3D and generate some fractal landscapes. Study the influence of H on the landscapes generated.

Research-based course project : This capstone course concludes with a research-based Course Project that starts during the first week of the session and continues throughout the duration.

User Account

All Pages