POST-ACQUISITION AND BALANCE SHEET PERIODS.
All amounts existing before acquisition belong to the pre-acquisition timeline, while all amounts arising after acquisition belong to the post-acquisition timeline. The balance sheet timeline reports on the balance at the reporting date. Let us consider the following extracts. Extract (a) Happy Ltd Comfort Ltd
GH¢
GH¢ Ordinary shares (issued at GH¢1)
25,000 Ordinary shares (issued at GH¢0.50)
20,000 Retained earnings
4,500 9,900 24,500 34,900 Extract (bi. Victory acquired 6,250 shares of Comfort Ltd in 2005 at a total cost of GH¢12,000. This acquisition gives Victory Ltd significant influence over Comfort Ltd. At the date of acquisition, Comfort Ltd’s retained earnings had a balance of GH¢4,300. The fair values of Comfort Ltd’s assets and liabilities approximated their carrying amounts. ii. On 1 January, 2012, Victory Ltd acquired 32,000 of Happy Ltd’s shares at a total cost of GH¢29,000. At the date of acquisition, Happy Ltd’s retained earnings had a balance of GH¢3,500. The fair values of the assets and liabilities approximated their carrying amounts except fora piece of land with a carrying amount of GH¢2,000 which had a fair value of GH¢2,500. This fair valuation adjustment has not yet been reflected in the separate financial statement of Happy Ltd. iii. In 2012, Happy Ltd sold goods to Victory Ltd at a markup of 20%. The goods cost Happy Ltd GH¢1,000 and one-half remained in inventory at the year end.
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