Purchase price allocation: consideration transferred, fair values, deferred tax, non-controlling interest (two methods), goodwill or gain on a bargain purchase and allocation of goodwill: Tarvel — lease

Context

Sorvane Group SA (fictitious entity) takes control of Tarvel Technologies SA in 20X6 by increasing its interest from 20 % to 70 %. The consolidation file must deal with the measurement exceptions (lease, reacquired right, replacement award, retirement plan, litigation, insurance contracts), the previous interest, the items outside the exchange, the goodwill, its allocation to cash-generating units, a reverse acquisition and the disclosures.

Assignment

Purchase price allocation of Tarvel, lease and allocation of goodwill

Purpose of the workpaper

List the consideration transferred, the fair values of the identifiable assets and liabilities assumed, the deferred tax on the fair value uplift, the non-controlling interest under both methods and the previously held interest; compute the goodwill or the excess to reassess, record the combination and allocate the goodwill to the cash-generating units. Fair values, rates, percentages and allocation keys are case data; the method chosen for the non-controlling interest is a choice of the acquirer, never imposed by the standard.

Questions of the file covered by this workpaper

• For each item of D3 to D5 (provision, levy, retirement plan, insurance contracts, reacquired right, replacement award, lease), which recognition or measurement rule applies?
• Compute the lease liability at the acquisition date.
• Compute the right-of-use asset at the acquisition date.
• Compute the identifiable net assets of Tarvel (with the lease), then those of the combination entry (excluding leases).
• What are the components of the non-controlling interest of Tarvel and which method does the case retain?
• Compute the consideration transferred, the non-controlling interest and the final goodwill, then that of the combination entry.
• Compute the goodwill grossed up to 100 % for the impairment test and the share belonging to the minority shareholders.
• Allocate the goodwill to the two cash-generating units according to the expected synergies.
• What information on the Tarvel combination must be prepared for the note, including the amounts given in D9?
• Record the combination with Tarvel (main entry, excluding leases).
• Record the right-of-use asset and the lease liability.

• MemoGroup profile and case conventionsOpen
• ContractObtaining control of Tarvel Technologies SAOpen
• ScheduleValuation of the Tarvel items at the acquisition dateOpen
• ContractLease in which Tarvel is the lesseeOpen
• ContractReacquired brand licence and replacement awardOpen
• ContractPayments to the selling managers and pre-existing receivableOpen
• MemoAllocation of goodwill to cash-generating unitsOpen
• MinutesPelgrane and Dorvane transactionOpen
• ExtractYear information on TarvelOpen
• MemoSustainability reportOpen