Of acquisition in relation to the contingent

of acquisition) in relation to the contingent liability is:
DR BCVR 2,100
DR DTA 900
CR Provision for legal claim 3,000
BCVR adjustments at acquisition date
30%
30%
70%
70%
This entry will also be posted onto the consolidation worksheet- refer slide 20 (Ref 3)
This entry will also be posted onto the consolidation worksheet- refer slide 20 (Ref 3)
18

BCVR adjustments at acquisition date
Goodwill
•
Goodwill arising on the acquisition is $13,600.
•
The business combination valuation adjustment
required on consolidation at 30 June 2011 (the date of
acquisition) in relation to the goodwill is as follows:
DR Goodwill 13,600
CR BCVR 13,600
•
There is not tax effect arising on the recognition of
goodwill as goodwill gives rise to an excluded
tempreary difference
This entry will also be posted onto the consolidation worksheet- refer slide 20 (Ref 4)
This entry will also be posted onto the consolidation worksheet- refer slide 20 (Ref 4)
19

Adjustments Hitech
Ltd.
$’000
Lotech
Ltd.
$’000
DR CR
Group
Cash in bank 460 200 660
Deferred Tax Asset 0.9 0.9
Land - 200 10 210
Building 100 25 125
Accumulated Depreciation - (20) 20 -
Investment in Lotech Ltd 400 - 400
Goodwill - - 13.6 13.6
860 480 1,409.5
Creditors 160 130 290
Deferred Tax Liability 3 + 13.5 16.5
Provision for legal claim 3 3
Share capital 600 300 900
Retained earnings 100 50 150
BCVR 2.1 7 +
31.5+13.6
50
860 480 1,409.5
BCVR adjustments at acquisition date
The consolidation journals will be posted onto the consolidation
worksheet at 30 June 2011 (the date of acquisition) as follows:
Note
consolidated
balances
Note
consolidated
balances
Goodwill, provision and BCVR exist on consolidation only (NIL balance in parent & sub’s books).
Goodwill, provision and BCVR exist on consolidation only (NIL balance in parent & sub’s books).
1
1
2
2
4
4
3
3
1, 2, 3, 4
1, 2, 3, 4
20

21

•
The pre-acquisition entry eliminates the asset “Investment
in subsidiary” (in the parent’s books) against the pre-
acquisition equity (in the subsidiary’s books)
•
The pre-acquisition entry required in our example is:
DR Share capital 300,000
DR Retained earnings 50,000
DR BCVR 50,000
CR Investment in Lotech 400,000
Pre-acquisition entry at acquisition date
These figures are taken from the acquisition analysis (refer back to slide 10)
These figures are taken from the acquisition analysis (refer back to slide 10)
22

Pre-acquisition entry at acquisition date
Adjustments Hitech
$’000
Lotech
$’000
DR CR
Group
Land - 200 10 210
Building 100 25 125
Accumulated Depreciation - (20) 20 0
Deferred tax asset 0.9 0.9
Goodwill - - 13.6 13.6
Investment in Lotech Ltd 400 - 400 0
Cash in bank 460 200 660
860 480 1,009.5
Creditors 160 130 290
Deferred Tax Liability 3 + 13.5 16.5
Contingent liability 3 3
Share capital 600 300 300 600