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On 2 May 2019 Wesfarmers Ltd ("Wesfarmers" ASX: WES) announced an offer to acquire an interest in Kidman Resources

Ltd ("Kidman" ASX: KDR).


• Wesfarmers proposal to acquire Kidman is only accepted by 50% of Kidman's

shareholders on 30 September 2019 for a transaction value of $388 million;

• The ultimate parent entity will directly acquire the 50% interest in Kidman;

• The equity accounting method for investment in associates will be adopted by

Wesfarmers in their consolidated financial statements;

• Kidman's interest in the Mt Holland mine project, concentrator and Kwinana

refinery (Wesfarmers, 2019, May 2, a, Thompson 2019, May 23, p.2) will be funded by a $700 million interest free loan from Wesfarmers during the year ended 30 June 2020. Wesfarmers will use its existing balance sheet cash balances to finance this transaction;

• During the year ended 30 June 2020 the Wesfarmers group will provide Kidman significant non cash chemical processing management services; and

• All other Kidman acquisition information and future transactions and events remain the same.


A) Explain how benefits and possible losses from Wesfarmers 50% interest in Kidman could be reflected in Wesfarmers future years consolidated financial statements and related notes when it is recognised as:

i) an associate; and in contrast

ii) a subsidiary.


B) Describe how the Wesfarmers $700 million loan transaction with Kidman to develop Kidman's interest in the Mt Holland mine project, concentrator and Kwinana refinery will affect individual asset accounts and the total assets amount presented in Wesfarmers consolidated financial statements when the 50% interest in Kidman is recognised as:

i) an associate; and in contrast

ii) a subsidiary.


C) Discuss the effects of the non cash chemical processing management service

transaction in Wesfarmers consolidated financial statements for the year ended 30 June 2020 when the 50% interest in Kidman is recognised as:

i) an associate; and in contrast

ii) a subsidiary.

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