90.2K

Verified Solution

Link Copied!

Poppy plc. (POPPY) is a company which manufactures rain harvesting containers. It purchased shares in Downa Limited (DOWNA), a company with hardware shops throughout Ireland, on 1 January 2017. Its results at 31 December 2017 are as follows:

POPPY 31 December 2017

DOWNA 31 December 2017

	000	000	000	000
ASSETS
Non-current Assets
Property, Plant and Equipment (PPE)		2,100		1,200
Investment in DOWNA		1,800
Total non-current assets		3,900		1,200
Current assets
Inventories	500		800
Trade receivables	400		900
Bank	690		260
Total current assets		1,590		1,960
Total assets		5,490		3,160
EQUITY AND LIABILITIES
Equity
Ordinary share capital (1 each)	2,000		400
Share premium	200		Nil
Retained earnings	2,090		2,040
Total equity		4,290		2,440
Current Liabilities
Trade payables	1,200		720
Total current liabilities		1,200		720
Total equity and Liabilities		5,490		3,160

1. POPPY paid 1,800,000 for 320,000 Shares in DOWNA on 1^st January 2017.
2. At the date of acquisition, the Property, Plant and Equipment (PPE) of DOWNA had a fair value which exceeded its carrying value by 250,000. At that date the PPE had a remaining useful life of 5 years. The fair value of the PPE at acquisition had not been adjusted for in the accounts of DOWNA
3. DOWNAs equity section of its financial statements (at the date of acquisition) was as follows:

Ordinary share capital	400,000
Retained earnings	1,240,000
Total	1,640,000

4. DOWNA sold goods to POPPY from the date of acquisition to the value of 600,000. DOWNA applies a mark up of 40% on selling price. At the year-end, POPPY still had inventory in stock to the value of 280,000 from DOWNA.
5. DOWNA had an intercompany amount of 160,000 owed by POPPY included in its trade receivables at year-end. POPPY has an amount included in its trade payables at year-end of 120,000. The difference was due to cash in transit at the year end.
6. POPPYs policy is to measure non-controlling interests at acquisition at their fair value. The Share price of DOWNA on 1^st January 2017 was 5 per share.

Requirement:

1. Set out consolidated statement of financial position of POPPY for the year-ended 31 December 2017.
2. IFRS 3 Goodwill allows 2 methods for the calculation of NCI at the date of acquisition. Explain these 2 methods and calculate the alternative to the method used in part (a)

Answer & Explanation Solved by verified expert

See Answer