Workshop Module 4
Discussion Questions
1. What is meant by a ‘business combination’?
IFRS 3 Appendix A:
Business:
“an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants”
Business combination:
A transaction or other event in which an acquirer obtains control of one or more businesses”
Consider inputs, processes and outputs
Only in a business combination can goodwill be present.
9. If an acquiree liquidates, what are the key accounts raised by the acquiree and what accounts are transferred to these accounts?
LIQUIDATION ACCOUNT
Assets taken over Contra assets Liabilities arising during the Liabilities assumed liquidation process Reserves Liquidation expenses Consideration received Balance to Shareholders Distribution
SHAREHOLDERS’ EQUITY ACCOUNT
Consideration paid to shareholders Share capital Balance Liquidation Account
Exercises
Exercise 14.21 ACQUISITION OF TWO BUSINESSES
Required
1. Prepare the acquisition analysis for the acquisition transactions of Queenfish Ltd.
3. Prepare the journal entries for the acquisition transactions in the records of Queenfish Ltd and Teraglin Ltd.
QUEENFISH LTD – BLACKFISH LTD – TERAGLIN LTD
Part 1.
Acquisition Analysis: Queenfish Ltd – Blackfish Ltd
Net fair value of identifiable assets and liabilities acquired:
Land & buildings $60 000 Plant & machinery 50 000 Office equipment 4 000 Shares in listed companies 15 000 Accounts receivable 26 000 Inventory 54 000 209 000 Accounts payable 14 000 Bank loan 16 000 30 000
Net fair value of identifiable assets and liabilities acquired $179 000
Consideration transferred:
Shares in Queenfish Ltd
Shares issued by Blackfish Ltd 60 000 Shares in Queenfish Ltd to issue: (3/4 x 60 000) 45 000 x $3.00 $135 000
Cash
Current
1. What is meant by a ‘business combination’?
IFRS 3 Appendix A:
Business:
“an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants”
Business combination:
A transaction or other event in which an acquirer obtains control of one or more businesses”
Consider inputs, processes and outputs
Only in a business combination can goodwill be present.
9. If an acquiree liquidates, what are the key accounts raised by the acquiree and what accounts are transferred to these accounts?
LIQUIDATION ACCOUNT
Assets taken over Contra assets Liabilities arising during the Liabilities assumed liquidation process Reserves Liquidation expenses Consideration received Balance to Shareholders Distribution
SHAREHOLDERS’ EQUITY ACCOUNT
Consideration paid to shareholders Share capital Balance Liquidation Account
Exercises
Exercise 14.21 ACQUISITION OF TWO BUSINESSES
Required
1. Prepare the acquisition analysis for the acquisition transactions of Queenfish Ltd.
3. Prepare the journal entries for the acquisition transactions in the records of Queenfish Ltd and Teraglin Ltd.
QUEENFISH LTD – BLACKFISH LTD – TERAGLIN LTD
Part 1.
Acquisition Analysis: Queenfish Ltd – Blackfish Ltd
Net fair value of identifiable assets and liabilities acquired:
Land & buildings $60 000 Plant & machinery 50 000 Office equipment 4 000 Shares in listed companies 15 000 Accounts receivable 26 000 Inventory 54 000 209 000 Accounts payable 14 000 Bank loan 16 000 30 000
Net fair value of identifiable assets and liabilities acquired $179 000
Consideration transferred:
Shares in Queenfish Ltd
Shares issued by Blackfish Ltd 60 000 Shares in Queenfish Ltd to issue: (3/4 x 60 000) 45 000 x $3.00 $135 000
Cash
Current