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Promise CoOn 1 January 20X5, Promise acquired 75% of Strey’s equity shares by means of an immediate share exchange of two shares in Promise for five shares in Strey. The fair value of Promise and Strey’s shares on 1 January 20X5 were $4 and $3 respectively. In addition to the share exchange, Promise will make a cash payment of $1.32 per acquired share, deferred until 1 January 20X6. Promise has not recorded any of the consideration for Strey in its financial statements. Promise’s cost of capital is 10% per annum.

The summarised statements of financial position of the two entities as at 30 June 20X5 are:
    Promise Strey Adier
    $'000 $'000 $'000
Assets        
Non‐current assets (note (ii))        
Property, plant and equipment            55,000 28,600      21,000
Financial asset equity investments (note (v))          11,500            6,000  
             66,500          34,600      21,000
         
Current assets        
Inventory (note (iv))            17,000          15,400  
Trade receivables (note (iv))            14,300          10,500  
Bank              2,200            1,600  
             33,500          27,500  
Total assets          100,000          62,100  
         
Equity and liabilities        
Equity        
Equity shares of $1 each            20,000          20,000        5,000
Other component of equity              4,000  Nil   
Retained earnings – at 1 July 20X4            26,200          14,000      15,000
         – for year ended 30 June 20X5            24,000          10,000        6,000
             74,200          44,000      26,000
         
Current liabilities (note (iv))            25,800 18,100  
Total equity and liabilities          100,000          62,100      29,000

The following information is relevant:

1. Strey’s business is seasonal and 60% of its annual profit is made in the period 1 January to 30 June each year.

2. At the date of acquisition, the fair value of Strey’s net assets was equal to their carrying amounts with the following exceptions: 

The fair value of Strey’s financial asset equity investments, carried at a value of $6 million, was $7 million (see also note (v)).
Strey owned the rights to a popular mobile (cell) phone game. At the date of acquisition, a specialist valuer estimated that the rights were worth $12 million and had an estimated remaining life of five years.

3. Following an impairment review, consolidated goodwill is to be written down by $3 million as at 30 June 20X5.

4. Promise sells goods to Strey at cost plus 30%. Strey had $1.8 million of goods in its inventory at 30 June 20X5 which had been supplied by Promise. In addition, on 28 June 20X5, Promise processed the sale of $800,000 of goods to Strey, which Strey did not account for until their receipt on 2 July 20X5. The in‐transit reconciliation should be achieved by assuming the transaction had been recorded in the books of Strey before the year end. At 30 June 20X5, Promise had a trade receivable balance of $2.4 million due from Strey which differed to the equivalent balance in Strey’s books due to the sale made on 28 June 20X5.

5. At 30 June 20X5, the fair values of the financial asset equity investments of Promise and Strey were $13.2 million and $7.9 million respectively

6. Promise’s policy is to value the non‐controlling interest at fair value at the date of acquisition. For this purpose the value given for Strey’s shares may be used.

Required:

Prepare the consolidated statement of financial position for Promise as at 30 June 20X5.  

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