Question

4 Example - Equity accounting PMAB acquires 50 percent of the shares (50 percent of the voting rights) in DB at SEK 600mn. The book value of equity is SEK 644mn. Other intangibles at acquisition are SEK 408mn, amortized over 5 years. Dividend from DB in year 1 is SEK 15mn. Complete the consolidation. Use the technique for equity accounting. You find the accounts for DB in example 3a Purchase price Other intangibles Purchased equity Goodwill

Answer 1

The question is quite unclear, it asks to complete the consolidation but the accounts of DB are not available. It also mentions using the Equity Accounting Technique. Under the equity method, the reported value is based on the size of the equity investment. The initial investment is recorded at cost and each quarter adjustments are made depending on the value at the end of the period.

As per the data given, I am assuming that Goodwill is to be calculated.

Goodwill = Purchase Consideration – Value of Assets (Investment) acquired

                = 600- 50% of (644+408)

                = 600-526

Goodwill = SEK 74mn