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The error in 20X9, regarding the omission of a piece of plant and equipment, should be accounted for under IAS 8. IAS 8 requires the correction of an
error to be accounted for retrospectively and for the financial statements to be presented as if the error had never occurred by correcting the prior period’s
information. In the 20X9 financial statements, an adjustment will be made to the opening value of property, plant, and equipment. The adjustment will be
the fair value of the equipment at December 31, 20X7, less any amounts that should have been recognized for the depreciation of that equipment. The
carrying value of goodwill is also adjusted for the reduction in value. Also, the comparative information for the year to December 31, 20X8, will be
restated, and any additional depreciation relating to that period will be charged.
Facts
Complex groups
CASE STUDY 8
Joanne purchased its shareholding in Graham on January 1, 20X8, and Brian purchased its shareholding in David on December 31, 20X8. Control was
achieved on these acquisition dates.
The following financial statements relate to the J group as at December 31, 20X9:
The retained earnings were:
The fair value of the NCI based on effective shareholdings were:
Brian David
$m $m
January 1, 20X8 80 20
December 31, 20X8 260 64
Brian David
$m $m
January 1, 20X8 160 378
December 31, 20X8 196 400
The goodwill of Brian is impaired as at December 31, 20X9, by $4 million following poor trading results for the year. There was no impairment prior to
this date.
Required
For both methods, of accounting for goodwill, show the statement of financial position at December 31, 20X9.
Solution
Under both scenarios the group’s effective share of David will be 80% of 60% that is 48%.