Assume that Company A acquires 70 per cent of Company B for a cash price of $10 million when the share capital and reserves of Company B are:

a. What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquiree is measured at fair value?

b. What amount will be shown in the consolidated statement of financial position for goodwill pursuant to AASB 3 assuming that any non-controlling interest in the acquiree is measured at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets?

c. What are some of the implications of allowing the group to have two options in accounting for goodwill on consolidation?

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Share capital Retained earnings $8 million $2 million $10 million