Chapter 5 - SOFP Pt 2

Question 1

What is deferred consideration

Answer 1

A promise to pay an agreed amount at a predetermined date in the future

Question 2

Deferred consideration entries

Answer 2

DR investment in subsidiary

CR Bank / Non-current Liab / Share Capital / Share Premium

Question 3

Entries to unwind the annual discount

Answer 3

DR Finance Cost - Retained earnings of parent

CR Deferred Consideration Liability

Question 4

Contingent Consideration

Answer 4

An agreement to settle in the future upon meeting set conditions

Question 5

Measurement of contingent consideration

Answer 5

Measured at fair value at acquisition date

Question 6

Journals in Parent’s FS for deferred cash at present value

Answer 6

DR / Cost of Investment in Subsidiary
CR / Non Current Liabilities - deferred consideration
CR / Share Capital
CR / Share Premium

Question 7

Journals to unwind the discount

Answer 7

DR / Finance Cost

CR / Non Current Liabilities - deferred consideration

Question 8

How fair value of net assets is measured

Answer 8

Acquire recognizes and measures the identifiable assets/Liabilities acquired at fair values at the acquisition date

Question 9

Non-controlling interest

Answer 9

Partial acquisition resulting in minority shareholders