A company purchased 16 million shares (representing an 80% controlling interest) in another company on 1 July 2010. The terms of the purchase were as follows:
- 1 share in the parent for every 4 shares in the subsidiary
- An immediate cash payment of $20.5 million
- A payment of 50% of the company's average annual profit for the first two years to be settled three years after the acquisition date. On 1 July 2010, the expected value of this payment (excluding any adjustment for the time value of money) was $10.2 million
The subsidiary's shares were trading at $20.40 at the date of acquisition. The parent's shares were trading at $15.20.
As a result of additional information available since the acquisition, the expected value of the payment based on profit (excluding adjustment for the time value of money) was revised to $11.4 million at 31 December 2010.
An appropriate annual discount factor for this company to use where necessary is 8%.
Requirement
Determine the consideration transferred figure used in the goodwill calculation for inclusion in the consolidated financial statements for the year ended 31 December 2010.
1(m) On 1 December 2009, Panther, a public company acquired 70% of the ordinary share capital of Sabre, a private company. The functional currency of Panther is the $ and the functional currency of Sabre is the zet.
Panther paid $46 million for its investment in Sabre on 1 December 2009, when the net fair value of the identifiable assets acquired and liabilities assumed of Sabre were 26,400 million zets.
Given that Sabre is a private company, Panther decided to measure the non-controlling interests at acquisition at the proportionate share of the fair value of the identifiable net assets of Sabre.
An impairment test conducted at group level on the investment in Sabre at 31 December 2010 indicated impairment losses of 600 million zets (gross of non-controlling interests). No impairment loss adjustments had been necessary at the previous year end.
Relevant exchange rates were:
1 December 2009 $1 = 470 zets
31 December 2009 $1 = 478 zets
31 December 2010 $1 = 490 zets