Thorn-EMI 1995 Annual Report

Notes to the accounts
29, Dispotal of butinerses
Tangible fixed assets
Investments
Stocks
Debtors
Creditors and provisions
Minority interests
Net assets disposed of
(Loss) profit on disposal before adiustment of goodwill written off
Total proceeds net of expenses
Satisfied by:
Cash consideration (net of cash and cash equivalents disposed)
Loan notes
Deferred consideration less deferred costs
Residual investments
3O. Purchare of businesses
Turnover and operating profit before operating exceptional items attributed to acquisitions on
the face of the profit and loss account are !306.5m and €374m respectively. The operating Profit
included foTTOEMI represents the full operating profrt for the second half of the year as
required by FRS 3. It does not rePresent the true year on year impact of the acquisition on the
Group's results as had the additional 5 Per cent acquisition not taken Place, the GrouP's
operating profit would have already included the share of profits of the associated undertaking
for that period.
TOEMI - On 3 October 1994, THORN EMI plc increased its shareholding in TOEMI from
50 to 55 per cent. TOEMI became a consolidated subsidiary on this date, having previously been
accounted for as an associated comPany.
The transaction was effected by a redemption of shares owned by the joint venture
partner,Toshiba Corporation, and funded byTOEMI's cash reserves in which the Group
already had a 50 per cent beneficial interest. The indirect cost to the Group was therefore
Yen 3.75 billion (€24.Im).
The Companies Act 1985 normally requires goodwill arising on the acquisition of a
subsidiary undertaking to be calculated as the difference between the total acquisition cost of
the undertaking and the fair value of the Group's share of the identifrable assets and liabilities at
the date it became a subsidiary undertaking.
FRS 2 recognises that, where an investment in an associated undertaking is increased and it
becomes a subsidiary undertaking, in order to show a true and fair view goodwill should be
calculated on each purchase as the difference between the cost of that Purchase and the fair
value at the date of that purchase.
If goodwill had been calculated in accordance with the basis set out in the Companies Act
1985, {61.2m of the Group's share of the retained earnings of TOEMI would have been
reclassified as goodwill and in total negative goodwill of f53.9m would have been recognised.
Integration costs of f5.0m have been accrued as operating exceptional items in the current
year results.