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Primrose, a public listed company acquired 900 million ordinary shares in Sunflower on 1 December 2011.

The
purchase consideration is made up as follows:
An immediate cash payment of $180 million.
A share exchange of two shares in Primrose for four shares in Sunflower.
A deferred cash payment of 17 cents per share acquired, payable on 1 December 2012.
Primrose has only recorded the cash payment. The value of each share in Primrose and Sunflower at the date of
acquisition was 90 cents and 59 cents respectively. The Primrose cost of capital is 7% per annum.
The statements of the financial position of the two companies at 30 November 2012 are shown below:
Primrose Sunflower
$m $m $m $m
NON-CURRENT ASSETS
Property, plant and equipment 960 510
Intangible: Software Nil 48
Investments
In Sunflower 180 Nil
In Agapanthus 20 Nil
Current assets
Inventory 94 30
Trade receivables 126 66
Bank Nil 6
220 102
TOTAL ASSETS 1,380 660
EQUITY AND LIABILITIES
Equity
Equity shares of 25 cents each 450 300
Retained earnings

- 1 Dec 2011 315 180


- Year ended 30 Nov 2012 135 30
450 210
900 510
Non-current liabilities
10% loan notes 180 30
Current liabilities
Trade payables 195 86
Income taxes payable 68 34
Operating overdraft 37 Nil
300 120

Total Equity and Liabilities 1,380 660


The following information is relevant:

(i) On the 1 December 2011 the fair value of Sunflower’s property, plant and equipment exceeded their carrying
value by $90 million. The property, plant and equipment had a remaining useful life of 18 years at this date.

(ii) The software of Sunflower represents the amortised development cost of an integrated electronic reporting
package. It was completed at a capitalised cost of $60 million and went on sale on 1 December 2010.Sunflowers
directors are currently amortising the development over ten years. However, the directors of Primrose feel that it
would be more appropriate to amortise the development over a six-year period.

(iii) Sunflower sold goods to Primrose for $12 million in the post-acquisitionperiod. One third of these goods
remain in inventory at 30 November 2012. Sunflower applies a 25% gross profit margin on all sales.

(iv) Sunflower’s trade receivables account balance includes $11m due from Primrose at the year-end. However
this does not agree with the current account balance included within Primrose’s trade payables account due to
cash-in-transit of $7 million paid by Primrose.

(v) Primrose bought 10 million shares in Agapanthus on 1 June 2012; thisrepresents a holding of 30% of
Agapanthus’ equity. Agapanthus’ profit is subject to seasonal variation. Its profit for the year ended 30

November 2012 is $18 million; $12 million was made from 1 December 2011 to 31 May 2012. Primrose uses
equity accounting in its consolidated financial statements for its investment in Agapanthus.

(vi) Goodwill is reviewed for impairment annually. At 30 November 2012 there had been an impairment loss of
$40 million in the value of consolidated goodwill since acquisition. Due to the difficult economic conditions as
evidenced by falling profits, the value of the investment in Agapanthus was impaired by $2.8 million.

(vii) It is group policy to value the non-controlling interest at acquisition at full (or fair) value.

Required:

Prepare the Consolidated Statement of Financial Position of Primrose as at 30 November 2012.

(25 marks)

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