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Calculate the Goodwill

Background Hummings Co is the parent company of a multinational listed group of companies. Hummings Co uses the dollar (\$) as its functional currency. Hummings Co acquired 80% of the equity shares of Crotchet Co on 1 January 204 and 100% of Quaver Co on the same date. The group's current financial year end is 31 December 20X4. Crotchet Co: functional currency The head office of Crotchet Co is located in a country which uses the dinar as its main currency. However, its staff are located in a variety of other locations. Consequently, half of their employees are paid in dinars and the other half are paid in the currency of grommits. Crotchet Co has a high degree of autonomy and is not reliant on finance from Hummings Co, nor do sales to Hummings Co make up a significant proportion of their income. All of its sales and purchases are invoiced in grommits and therefore Crotchet Co raises most of its finance in grommits. Cash receipts are retained in both grommits and dinars. Crotchet Co does not own a dollar (\$) bank account. Crotchet Co is required by law to pay tax on its profits in dinars. The acquisition of crotchet co Hummings co paid cash of $24 million for the 80% holding in crotchet co on 1 January 204. Hummings co has a policy of measuring non-controlling interests at fair value. The fair value of the non-controlling interests in crotchet co on 1 January 204 was 56 million. since Crotchet co has a range of net assets held domestically and overseas, the fair values of the net assets at acquisition were determined in their local currency. Hence, the fair value of some assets have been determined in dinars and others in grommits. The total fair value of the net assets denominated in grommits at 1 January 204 was 43 million grommits. The total fair value of the net assets denominated in dinars at 1 January 204 was 50 million dinars. Excluded from these fair values are several contracts with the customers of crotchet co. These contractual relationships prohibit the customers of crotchet co from obtaining services from any of the main competitors of crotchet co. They have an estimated fair value at 1 January 204 of 15 million grommits. At 31 December 20x4, it was decided to impair goodwill by 30%. The following is a summary of the exchange rates between the dollar, grommits and dinars at 1 January 204 and 31 December 204 : The acquisition of Quaver co On 1 January 20X4, Hummings co purchased a 100% equity interest in Quaver C0. Hummings Co made the acquisition with the intention to sell and therefore did not wish to have an active involvement in the business of Quaver Co. Hummings Co immediately began to seek a buyer for Quaver co and felt that the sale would be completed by 31 October 204 at the latest. A buyer for Quaver co was located in August 204 but, due to an unforeseen legal dispute over a contingent liability disclosed in Quaver co's financial statements, the sale had not yet been finalised as at 31 December 204. The sale is expected to be completed in early 205. Impairment of bonds value. The bonds are repayable on 31 December 206 and the effective rate of interest is 8%. Hummings co's business model is to collect the contractual cash flows over the life of the asset. At 31 December 203, the bonds were considered to be low risk and as a result the 12month expected credit losses are expected to be $10,000. On 31 December 20X4, stave co paid the coupon interest. However, at that date, the risks associated with the bonds were deemed to have increased significantly. The present value of the cash shortfalls arising on default in the year ended 31 December 205 is $462,963 and the probability of default is 3%. The present value of cash shortfalls arising on default in the year ended 31 December 206 is $6,858,710 and the probability of default is 5%

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