On 1 July 2020 Hessa acquired the following non-current investments: 80% of the equity share capital of

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Question:

On 1 July 2020 Hessa acquired the following non-current investments:

80% of the equity share capital of Sara transferring BHD3.6 million in cash, BHD8 million on 1 July 2022 and two shares in Hessa for every three shares acquired in Sara. The market price of shares in Hessa and Sara on 1 July 2020 were BHD1.800 and BHD1.400, respectively.

1.6 million equity shares in Adam at a cost of BHD6.250 each.

Extracts from the statements of financial position of the three companies at 31 December 2020 are as follows:

	Hessa	Sara	Adam
	BHD’000	BHD’000	BHD’000
Assets
Non-current assets
Property, plant and equipment	20,000	8,500	16,500

Equity
Equity shares of BHD1 each	10,000	3,000	4,000
Retained earnings:
at 1 January 2020	27,000	6,000	12,000
for the year ended 31 December 2020	10,000	2,000	8,000

The following information is relevant:

1. The fair values of Sara’s assets were equal to their carrying amounts with the exception of land and plant. Sara’s land had a fair value of BHD400,000 in excess of its carrying amount and plant had a fair value of BHD1.6 million in excess of its carrying amount. The plant had a remaining life of four years (straight-line depreciation) at the date of acquisition.

2. In the post-acquisition period Hessa sold goods to Sara at a price of BHD6 million. These goods had cost Hessa BHD4 million. Half of these goods were still in the inventories of Sara at 31 December 2020.

3. The directors elected to measure the non-controlling interests in Sara at their fair value of BHD3 million at acquisition. An impairment test at 31 December 2020 concluded that consolidated goodwill was impaired by BHD400,000 and the investment in Adam was impaired by BHD200,000.

4. An appropriate discount rate is 6%. The present value of BHD1 receivable in one year is BHD0.943 and the present value of BHD1 receivable at the end of two years is BHD0.890.

Required

Which is the correct amount of consolidated goodwill from Hessa’s consolidated statement of financial position as at 31 December 2020?