Ham plc acquired 100% of the common shares of Burg plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows:
|
Ham £000
|
Burg £000
|
|
ASSETS
|
|
|
|
Non-cur rent assets
|
|
|
|
Property, plant and equipment
|
250
|
100
|
|
Investment in Burg
|
90
|
|
|
Current assets
|
100
|
70
|
|
Total assets
|
440
|
170
|
|
EQUITY AND LIABILITIES
|
|
|
|
Capital and reserves
|
|
|
|
£1 shares
|
200
|
100
|
|
Retained ear nings
|
160
|
10
|
|
360
|
110
|
|
Current liabilities
|
80
|
60
|
|
Total equity and liabilities
|
440
|
170
|
Notes:
1 The fair value is the same as the book value.
2 £15,000 of the negative goodwill arises because the net assets have been acquired at below their fair value and the remainder covers expected losses of £3,000 in the year ended 31/12/20X0 and £2,000 in the following year.
Required:
(a) Prepare a consolidated statement of financial position for Ham plc as at 1 January 20X0.
(b) Explain how the negative goodwill will be treated.