Advanced Financial Accountnn 2018
(Exercises)
Applying IFRS standards (4th edition)
Picker et al.
Subject materr
- Chaptersr 14,20,21,23,24,6,7,16
- Certain paranraphs are not relevant (will be indicated)
Gradinnr
30% (nroup assinnment + analysis)
70% (exam)
100%
Lecture 1: Introduction & Setng the scene
NONE
Lecture 2: Business Combinations
1. Is this a business combinationn
ANSWER
In case 1 there is a combinaton. F does have (business) actvites, while entty E acquires full control (100%) by buyinn
shares.
In case 2 there is no combinaton. Entty F does not have any actvites but full control is bounht by E.
In case 3 there is a business combinaton. It does not mater if buys just one hotel (from e.n. a franchises such as
Fletcher or Hilton). The bunch of assets that buys from Z form a business actvity (provide accommodatonn space).
Therefore it has satssed both criteria.
- Case 1 E F E trades an … amount of shares that is equivalent to 100% shares of F
- Case 2 E F F nives all shares in exchanne for money, althounh there are no actvites
Within entty F
- Case 3 X Z nives Z cash (or the equivalent) to buy the hotel includinn all actvitese
2. What is the date of transfer of controln
, ANSWER
Date of transfer is the 23th of May. Normally Entty A could force B throunh their votnn rinhts if they were in
possession of the majority of shares. However this is here not yet the case. On the 23th of may the contract is in efect
to transfer the lenal ownership of shares on the 1 st of July. Althounh the company cannot force entty B throunh it’s
votnn rinhts, it however can usinn the contract as leverane. In this case it is assumed that entty B has no intenton to
breach the contract (which would lead to the liability of consequences such as a lawsuit), in reality this is however stll
possible.
3. Contingent consideration
ANSWER
(10∗0,8)
The value of reconniton isr 40+ = 47,25 ≈ 47,3 billion
1,052
What happens if it does not make the tarnet?
- Look at possible impairments of noodwill
(10∗0,8)
- Price adjustment (e.n. liability will be none)r 2
=7,3∗1,052 =8
1,05
- Re-estmate the probabilites
- Any channes are for the snancial statement.
4. Contingency in Shares
ANSWER
Value = 1.000.000*40 + (250.000*40*0,8) = 48 mln shares
If tarnet is not metr No adjustment is made, you value the company at inital fair value. Since no cash or assets
are involved.
(Exercises)
Applying IFRS standards (4th edition)
Picker et al.
Subject materr
- Chaptersr 14,20,21,23,24,6,7,16
- Certain paranraphs are not relevant (will be indicated)
Gradinnr
30% (nroup assinnment + analysis)
70% (exam)
100%
Lecture 1: Introduction & Setng the scene
NONE
Lecture 2: Business Combinations
1. Is this a business combinationn
ANSWER
In case 1 there is a combinaton. F does have (business) actvites, while entty E acquires full control (100%) by buyinn
shares.
In case 2 there is no combinaton. Entty F does not have any actvites but full control is bounht by E.
In case 3 there is a business combinaton. It does not mater if buys just one hotel (from e.n. a franchises such as
Fletcher or Hilton). The bunch of assets that buys from Z form a business actvity (provide accommodatonn space).
Therefore it has satssed both criteria.
- Case 1 E F E trades an … amount of shares that is equivalent to 100% shares of F
- Case 2 E F F nives all shares in exchanne for money, althounh there are no actvites
Within entty F
- Case 3 X Z nives Z cash (or the equivalent) to buy the hotel includinn all actvitese
2. What is the date of transfer of controln
, ANSWER
Date of transfer is the 23th of May. Normally Entty A could force B throunh their votnn rinhts if they were in
possession of the majority of shares. However this is here not yet the case. On the 23th of may the contract is in efect
to transfer the lenal ownership of shares on the 1 st of July. Althounh the company cannot force entty B throunh it’s
votnn rinhts, it however can usinn the contract as leverane. In this case it is assumed that entty B has no intenton to
breach the contract (which would lead to the liability of consequences such as a lawsuit), in reality this is however stll
possible.
3. Contingent consideration
ANSWER
(10∗0,8)
The value of reconniton isr 40+ = 47,25 ≈ 47,3 billion
1,052
What happens if it does not make the tarnet?
- Look at possible impairments of noodwill
(10∗0,8)
- Price adjustment (e.n. liability will be none)r 2
=7,3∗1,052 =8
1,05
- Re-estmate the probabilites
- Any channes are for the snancial statement.
4. Contingency in Shares
ANSWER
Value = 1.000.000*40 + (250.000*40*0,8) = 48 mln shares
If tarnet is not metr No adjustment is made, you value the company at inital fair value. Since no cash or assets
are involved.
