Critically evaluate the Australian requirements for accounting for business combinations.
In your discussion you should specifically address the following issues:
1) Exclusions from the scope of AASB 3
2) The implications of the requirement to use the acquisition method of accounting for business combinations
3) The determination of fair values of assets in a business combination
4) The reasons for the choice of fair value to measure assets and liabilities acquired in a business combination
5) The nature and treatment of goodwill or bargain purchase arising on a business combination.

XCITE Ltd acquired the net assets of an existing business Bathurst Pty Ltd on 1 July 2013. The statement of financial position of XCITE Ltd immediately prior to the acquisition is as shown below:

The identifiable net assets of Bathurst Pty Ltd acquired by XCITE Ltd, valued at fair value at date of acquisition comprise the following:

In addition Bathurst Pty Ltd has unrecorded contingent liabilities estimated at $65,000
The terms of the acquisition are as follows:
– Cash consideration of $120,000 to be paid to Bathurst Pty Ltd on 1 July 2013. This amount is to be raised by a bank loan (XCITE Ltd’s incremental borrowing rate is 8%)
– The shares in Woolworths held by XCITE Ltd which have a fair market value of $90,000 at 1 July 2013 are to be transferred to Bathurst Ltd.
– XCITE Ltd is to issue 50,000 shares to Bathurst Pty Ltd. At 1 July 2013 XCITE Ltd’s shares are trading at $4 per share.
– XCITE incurred legal costs of $10,000 and share issue costs of $4,000 in connection with the acquisition

Prepare the (a) Acquisition analysis, (b) Journal entries in the books of XCITE Ltd to record the acquisition of Bathurst Pty Ltd and a (c) statement of financial position for XCITE Ltd immediately after the acquisition.

1) Explain how profits or losses on depreciable asset transfers are realised by a consolidated group.

2) Outline the non-controlling interest’s perspective of intragroup transfers for services.

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