Hee Hee Bhd had acquired 80% interest in Choo Choo Bhd for RM30 million. A fair valuation
Question:
Hee Hee Bhd had acquired 80% interest in Choo Choo Bhd for RM30 million. A fair valuation exercise conducted on the date of acquisition revealed that Choo Choo Bhd's fair value of net assets was equal to its carrying amounts. On the date of acquisition, the fair value of the net assets of Choo Choo Bhd was RM25 million.
On 1 January 2021, Hee Hee Bhd disposed 50% of its interests in Choo Choo Bhd to Adam Bhd for RM50 million when the fair value of the net assets of Choo Choo Bhd was RM70 million. On the date of disposal, the fair value of the remaining shares was RM20 million.
The financial year ended of Hee Hee’s group is on 31 December every year. The goodwill on acquisition remains unimpaired since the date of acquisition. It is the group’s policy to value the non controlling interests at its proportionate share of the fair value of the subsidiary’s identifiable net assets at the acquisition date.
Required:
a) Calculate the gain or loss on the disposal of the share for the Hee Hee Group.
b) Discuss the relationship between Hee Hee Bhd and Choo Choo Bhd after the disposal.
Expert Answer:
a Gainloss on the disposal of the share for the Hee Hee Group RM 15 million Gain The cost of acquisi... View the full answer
