Bear Property Sdn Bhd acquired 80% equity interest in Memo Berhad, paying RM500,000 in cash. When the share capital and reserves of the latter were RM300,000 and RM200,000 respectively. Immediately after acquisitions, Memo Berhad declared and paid a net dividend of RM100,000 and the balance in the shareholders’ funds was as follows:

	RM’000
Share capital of RM1 each	300
Reserves	100
	400

Required:

Calculate the goodwill arising on acquisition on the basis of:

i) The initial shareholders’ funds at date of acquisition.

ii) The shareholders’s funds after payment of dividend.

c) MFRS 3 Business Combinations permits a non-controlling interest at the date of acquisition to be valued by one of two methods: at its proportionate share of the subsidiary’s identifiable net assets; or at its fair value.

Required:

Explain the difference that the accounting treatment of these alternative methods could have on the consolidated financial statements, including where consolidated goodwill may be impaired.