SCENARIO You are a Financial Analyst at Agri Communications Ltd. (AgriComm). AgriCommdevelops and manufactures equipment for technology and communications in the rural environment. Since its incorporation it has grown steadily through internal expansion. In the middle of 2021, Jordan Danger, the sole owner of AgriComm, met a couple of students, from ACC, who were working on a new technology to increase the distance a remote controlledtractor can travel while still communicating with the operator. At a recent lunch meeting, the students told Jordan that they had been able to register a patent to protect their technology. Furthermore, they were interested in selling their business, ACC Technologies(ACCTech), which owns the patent and some other assets used in the development of this technology ACCTech has not yet begun producing outputs for sale to prospective customers. After a week of negotiation, Jordan and the students agreed to the following: Rather than buying the shares of ACC Tech, AgriComm would buy the assets and assume the liabilities of ACCTecheffective January 1, 2021. The purchase price would be payable as follows: o $400,00 on October 1,2021 o As part of the purchase, AgriComm incurred $5,000 in professional fees. The students would commit to work for AgriComm as consultants over the next three years and would be paid $50 per hour for their services. The condensed statement of financial position for ACCTechon October 1 was as follows: Carrying Amount Fair Value Computer Equipment $6,000 $15,000 Patent Registration Costs 55,000 Current Assets 110,000 130,000 $186,000 Shareholder's Equity $160,000 Fair Value Carrying Amount 26,000 Liabilities 26,000 $186.000 Jordan was pleased and excited about the acquisition Jordan felt that it was a fair deal for both parties given that the business had not yet eamed any revenue. Jordan is now worried about the accounting for this acquisition because it is the first time that his company has purchased another business. Although AgriComm has always followed IFRS, Jordan is wondering whether now is the time to opt for a simpler approach. In particular, if whether IFRS would allow the entire acquisition differential to be allocated to goodwill. This would keep it simple and would also avoid a charge to income over the first few years since goodwill does not need to be amortized. If the acquisition differential is allocated to the patent, then Jordan would like to write off the patentover the maximum period of 20 years. Jordan has asked you, the Financial Analyst, to prepare a presentation on the accounting implications for the proposed acquisition Jordan wants to understand how tomeasure the individual assets and liabilities, and how this measurement would affect profit in the first year after the date of acquisition Balance Sheet Oct 1, 2021 AgriComm Current Assets 50,000 Computer Equipment 200,000 Building 500,000 $750,000 Current Liabilities $25,000 Long Term Debt 260,000 Shareholder Equity 465,000 $186.000 SCENARIO You are a Financial Analyst at Agri Communications Ltd. (AgriComm). AgriCommdevelops and manufactures equipment for technology and communications in the rural environment. Since its incorporation it has grown steadily through internal expansion. In the middle of 2021, Jordan Danger, the sole owner of AgriComm, met a couple of students, from ACC, who were working on a new technology to increase the distance a remote controlledtractor can travel while still communicating with the operator. At a recent lunch meeting, the students told Jordan that they had been able to register a patent to protect their technology. Furthermore, they were interested in selling their business, ACC Technologies(ACCTech), which owns the patent and some other assets used in the development of this technology ACCTech has not yet begun producing outputs for sale to prospective customers. After a week of negotiation, Jordan and the students agreed to the following: Rather than buying the shares of ACC Tech, AgriComm would buy the assets and assume the liabilities of ACCTecheffective January 1, 2021. The purchase price would be payable as follows: o $400,00 on October 1,2021 o As part of the purchase, AgriComm incurred $5,000 in professional fees. The students would commit to work for AgriComm as consultants over the next three years and would be paid $50 per hour for their services. The condensed statement of financial position for ACCTechon October 1 was as follows: Carrying Amount Fair Value Computer Equipment $6,000 $15,000 Patent Registration Costs 55,000 Current Assets 110,000 130,000 $186,000 Shareholder's Equity $160,000 Fair Value Carrying Amount 26,000 Liabilities 26,000 $186.000 Jordan was pleased and excited about the acquisition Jordan felt that it was a fair deal for both parties given that the business had not yet eamed any revenue. Jordan is now worried about the accounting for this acquisition because it is the first time that his company has purchased another business. Although AgriComm has always followed IFRS, Jordan is wondering whether now is the time to opt for a simpler approach. In particular, if whether IFRS would allow the entire acquisition differential to be allocated to goodwill. This would keep it simple and would also avoid a charge to income over the first few years since goodwill does not need to be amortized. If the acquisition differential is allocated to the patent, then Jordan would like to write off the patentover the maximum period of 20 years. Jordan has asked you, the Financial Analyst, to prepare a presentation on the accounting implications for the proposed acquisition Jordan wants to understand how tomeasure the individual assets and liabilities, and how this measurement would affect profit in the first year after the date of acquisition Balance Sheet Oct 1, 2021 AgriComm Current Assets 50,000 Computer Equipment 200,000 Building 500,000 $750,000 Current Liabilities $25,000 Long Term Debt 260,000 Shareholder Equity 465,000 $186.000