ACCA AAA ^UK Syllabus D. Audit of Historical Financial Information - Auditing Goodwill - Notes ^{33 / 41}

FV of Consideration

• If it's cash easy - use the figure given

• If it's future payment - discount this figure down

• If it's a contingent item (dependent on something happening) - use the FV of that item

NCI

One of two choices

• Proportionate value of FV of S's NA

• FV of S as a whole

• This means goodwill share is only given to NCI in the FV method

FV of NA acquired

• Include intangibles and contingent liabilities that are not on S's accounts normally

• If the values are provisional - there is 1 year from date of acquisition to change this figure

Audit evidence

1. Agreement of the monetary value and payment dates of the consideration per the client schedule to legal documentation signed by vendor and acquirer.

2. Inspect the bank statement and cash book whether the payment was paid.

3. If payment occurs after year end confirm that a current liability is recognised on the individual company and consolidated statement of financial position (balance sheet).

4. Board minutes approving the payment.

5. Recalculate discounting calculations applied to deferred and contingent consideration.

6. Agreement that the discount rate used is pre-tax, and reflects current market assessment of the time value of money

7. Agree % of ownership, e.g. using Companies House search/register of significant shareholdings

8. Obtain due diligence report and agree net assets valuation if appropriate