On Dec 31, 01, entity E acquires 100% of the shares of entity S for CU...
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On Dec 31, 01, entity E acquires 100% of the shares of entity S for CU 100. S is free of debt. A simplified illustration of S's statement of financial position as at Dec 31, 01 is presented below. For simplification purposes it is assumed that it is identical with S's statement of financial position Il as at the same date. Share capital Retained earnings Total Various assets 90 70 20 Total 90 90 The value of the assets of S on acquisition date determined according to IFRS 3 is CU 95. Moreover, S owns income tax loss carryforwards amounting to CU 40 that do not meet the recognition criteria when the business combination is initially accounted for as at Dec 31, 01. Version (a) On Dec 31, 02, new information about facts and circumstances that existed at the acquisition date indicates that the recognition criteria for the income tax ioss carryforwards were met on the acquisition date. Version (b) On Dec 31, 02, the recognition criteria are met due to a significant improvement in S's performance after acquisition date. In Its separate financial statements E accounts for its investment in S (shares) at cost (IAS 27.38a). Posting status (in E's separate financial statements): Dec 31, 01 Dr Investment of E in S (shares) Cash 100 Cr 100 Posting stalus (capital consolidation in E's consolidated financial stalements): Dec 31, 01 Dr Goodwill Various assets of S 5 Dr Dr 5 Share capital Retained earnings Investment of E in S (shares) 70 20 Dr Cr 100 Required Propare any necessary entries in E's consolidated financial statemonts as at Dec 31, 02 rogarding deferred tax. The tax rate is 25%. On Dec 31, 01, entity E acquires 100% of the shares of entity S for CU 100. S is free of debt. A simplified illustration of S's statement of financial position as at Dec 31, 01 is presented below. For simplification purposes it is assumed that it is identical with S's statement of financial position Il as at the same date. Share capital Retained earnings Total Various assets 90 70 20 Total 90 90 The value of the assets of S on acquisition date determined according to IFRS 3 is CU 95. Moreover, S owns income tax loss carryforwards amounting to CU 40 that do not meet the recognition criteria when the business combination is initially accounted for as at Dec 31, 01. Version (a) On Dec 31, 02, new information about facts and circumstances that existed at the acquisition date indicates that the recognition criteria for the income tax ioss carryforwards were met on the acquisition date. Version (b) On Dec 31, 02, the recognition criteria are met due to a significant improvement in S's performance after acquisition date. In Its separate financial statements E accounts for its investment in S (shares) at cost (IAS 27.38a). Posting status (in E's separate financial statements): Dec 31, 01 Dr Investment of E in S (shares) Cash 100 Cr 100 Posting stalus (capital consolidation in E's consolidated financial stalements): Dec 31, 01 Dr Goodwill Various assets of S 5 Dr Dr 5 Share capital Retained earnings Investment of E in S (shares) 70 20 Dr Cr 100 Required Propare any necessary entries in E's consolidated financial statemonts as at Dec 31, 02 rogarding deferred tax. The tax rate is 25%.
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Solution a Acquired deferred tax benefits recognized within the measurement period IFRS 345 that res... View the full answer
Related Book For
Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
Posted Date:
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