(ii) Kigumi purchased 30% of the voting equity of Floria on 1 October 2016. Kigumi exerts
significant influence over Floria because of this investment.
(iii) Goodwill of Milly was reviewed for impairment at 31 March 2017 and was found to
have suffered an impairment loss of $30,000. The 30% investment in Floria was
reviewed for impairment at 31 March 2017 and found to have suffered an impairment of
$25,000.
(iv) Included in Milly’s net assets on the acquisition date was some machinery with a fair
value of $48,000 above its carrying amount. The useful economic life of this machinery
at the acquisition date was estimated to be six years. The fair value adjustment has
been considered in arriving at the $3 million referred to in note (i), but has not been
incorporated into the books of Milly.
During the year ended 31 March 2017 Kigumi sold goods to Milly totaling $36,000.
These goods were sold by Kigumi at a mark-up of 20% on cost price. The goods were
traded evenly throughout the year. $6,000 worth of inventory (at cost to Milly) was held
by Milly at 31 March 2017. These goods were supplied in February and March 2017.
(vi) Since acquisition, Kigumi has managed the administration of the entire group. Kigumi
invoiced Milly $10,000 for its share of these costs. Kigumi recorded this transaction
within “other income”, and Milly within “operating expenses’.
(vii) On 1 February 2017, Floria sold some land to Kigumi for $200,000, recording a profit of
$80,000. This profit is included within “other income’ in the books of Floria. Assume this
transaction had no taxation impact.
(viii) Kigumi has a policy of revaluing property to fair value as permitted under the
revaluation model of IAS 16. Neither Milly nor Floria adopts the revaluation model of
IAS 16 - Property, Plant and Equipment, instead choosing the cost model. If they had
adopted the revaluation model, Milly would have recorded revaluation gains of $15,000
at 31 March 2017. No revaluations would have been necessary prior to its acquisition.