of acquisition in relation to the contingent liability is DR BCVR 2100 DR DTA

Of acquisition in relation to the contingent

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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
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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
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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
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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
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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
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