On January 19, 2010, Kraft Foods announced the terms of its final offer for each outstanding ordinary share of Cadbury, including each ordinary share represented by an American De positary Share ("Cadbury ADS"), and the Cadbury Board of Directors recommended that Cadbury shareholders accept the terms of the final offer. On February 2, 2010, all of the con ditions to the offer were satisfied or validly waived, the initial offer period expired, and a sub sequent offer period immediately began. At that point, Kraft Foods had received acceptances of 71.73% of the outstanding Cadbury ordinary shares, including those represented by Cadbury ADSs ("Cadbury Shares"). As of June 1, 2010, Kraft Foods owned 100% of all outstanding Cadbury Shares. Kraft Foods believes the combination of Kraft Foods and Cadbury will create a global snacks pow erhouse and an unrivaled portfolio of brands that people will love. Under the terms of its final offer and the subsequent offer, Kraft Foods agreed to pay Cadbury shareholders 500 pence in cash and 0.1874 shares of Kraft Foods Common Stock per Cadbury ordinary share and 2,000 pence in cash and 0.7496 shares of Kraft Foods Common Stock per Cadbury ADS.
This resulted in a $18.5 billion value for Cadbury, or approximately £11.6 billion (based on the average price of $28.36 for a share of Kraft Foods Common Stock on February 2, 2010 and an exchange rate of $1.595 per £1.00).
On February 2, 2010, Kraft Foods acquired 71.73% of Cadbury Shares for $13.1 billion and the value attributed to noncontrolling interests was $5.4 billion. From February 2, 2010, through June 1, 2010, Kraft Foods acquired the remaining 28.27% of Cadbury Shares for $5.4 billion.

A. For this step acquisition, describe the appropriate accounting for the acquisition.
B. The change in value for the noncontrolling interest between February 2 and the date that Kraft acquired all remaining shares was an increase of $38 million.
What is the appropriate accounting for the increase in value?

  • CreatedMarch 13, 2015
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