The following Statements of Comprehensive Income relate to Rooster plc (Rooster) and its investee companies, Houseton plc

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The following Statements of Comprehensive Income relate to Rooster plc (Rooster) and its investee companies, Houseton plc (Houseton) and Kelson plc (Kelson). Kelson is based in New Jersey, USA. It produces, sells and is managed autonomously in the USA. Accordingly, its Financial Statements are presented in dollars.

The following additional information is provided:
(i) Rooster purchased a 60% holding in Kelson on 1 August 2012 for an immediate cash payment of US$510 million. On that date, the fair values of the net assets of Kelson totalled US$750 million, which was the same as their carrying values in the books of Kelson. The 40% non-controlling interest had a fair value of US$300 million on 1 August 2012. No impairment of goodwill had occurred by 31 July 2013.
(ii) Rooster purchased a 70% holding in the Equity of Houseton on 1 December 2012. The purchase price was €650 million paid in cash. Goodwill arising on acquisition was calculated at €140 million using the fair value method. On 31 July 2013, impairment losses against consolidated goodwill amounting to €20 million needed to be recognized.
(iii) On 1 December 2012, the fair value of certain plant & equipment held by Houseton was €24 million in excess of its carrying value. This plant & equipment had a useful economic life of 4 years from the date of acquisition. The revised values have not been incorporated into the books of Houseton and Depreciation was accounted for based on the carrying values.
(iv) During the three months ended 31 July 2013, Houseton sold goods to Rooster for €24 million. These goods were sold at a mark-up on cost of 60%. One third of the goods remained in the inventory of Rooster at 31 July 2013.
(v) Houseton declared a dividend of €50 million during the year from post-acquisition profits. Rooster has recognized its share of this dividend within ‘investment income’.
(vi) The US$ / € Exchange Rate was as follows during the relevant period:

Date …………………………………......….US$ per €1
1 August 2012 ………………………………….1.35
31 July 2013 …………………………………….1.25
Average for period …………………………..1.28

Required:
(a) Calculate
(i) the goodwill arising on the acquisition of Kelson for inclusion in the group accounts at the date of acquisition; and
(ii) the goodwill figure to be reported in the group accounts at 31 July 2013. Explain clearly the accounting treatment of any difference between the two figures.
(b) Prepare a consolidated Statement of Profit or Loss and Other Comprehensive Income for the Rooster Group for year ended 31 July 2013 in accordance with IFRS. Your answer should show clearly the amount of any exchange gains or losses recognized during the period.
(c) Explain what is meant by the ‘functional currency’ of an entity? Discuss briefly the guidance offered by IAS 21 to assist in determining an entity’s functional currency.