Porcupine Lid (PL) purchased 75% of the capital of Aardvark Lid (AL) for $250,000 on 1 July 2016. At this date the equity of AL was: Share capital $100,000 General reserve 60,000 Retained earnings 40,000 At the date of acquisition, AL had not recorded any goodwill, and all identifiable assets and liabilities were recorded at fair value except for the following assets: Carrying amount Fair value Inventory $ 70,000 $100,000 Land 50,000 100,000 Differences between carrying amounts and fair values are recognised on consolidation. Both companies have 30 June balance dates. As a result of an impairment test, all goodwill was written off in 2017. All of the inventory on hand at 1 July 2016 was sold by 30 June 2017. The tax rate is 30%. PL uses the partial goodwill method AL made a profit before tax in the 2016-17 period of $40,000. REQUIRED: (a) Since this is the first time PL has been required to prepare Group Financial Statements, the Managing Director of PL has been asked by his Board for some clarification concerning group accounting. Specifically, the Board members have asked you to provide a bullet point summary of the following concepts: (i) The rationale for preparing group accounts (ii) Non Controlling Interests (NCI).

pur-new-sol

Related Questions