Hikoi Ltd has recently undertaken a negotiations to acquire 70% of shares of Hapu Ltd. At the
Question:
Hikoi Ltd has recently undertaken a negotiations to acquire 70% of shares of Hapu Ltd.
At the start of negotiations, Hikoi Ltd owned 30% of the shares of Hapu Ltd. The negotiations began on 1 January 2023 and enough shareholders in Hapu Ltd agreed to the deal by 30 September 2023. The agreement was for shareholders in Hapu Ltd to receive shares in Hikoi Ltd in exchange for their shares in Hapu Ltd. Over the negotiation period, the share price of Hikoi Ltd shares reached a low of \($5.40\) and a high of $6.20.
The\) accountant for Hikoi Ltd, Mr Taumata, knows that AASB 3/IFRS 3 must be applied in accounting for the business combination. However, he is confused as to how to account for the original 30% investment in Hapu Ltd, what share price to use to account for the issue of Hikoi Ltd’s shares, and how the varying dates such as the date of exchange and acquisition date will affect the accounting for the business combination.
Required
Provide Mr Taumata with advice on the issues that are confusing him.
Step by Step Answer:
Financial Reporting
ISBN: 9780730396413
4th Edition
Authors: Janice Loftus, Ken Leo, Sorin Daniliuc, Belinda Luke, Hong Nee Ang, Mike Bradbury, Dean Hanlon, Noel Boys, Karyn Byrnes