How can I do this?

Books as of Jan 1st Y1 (After acquisition of Son Co)

Books as of Dec 31st Y1

Books as of Dec 31st Y2

Books as of Dec 31st Y3

Parent Co

Son Co

Pa Co

Son Co

Pa Co

Son Co

Pa Co

Son Co

Assets

Dep R

Euro (€)

1.3

Dólar ($)

Fair Values ($)

Euro (€)

1.3

Dólar ($)

Fair Values ($)

Euro (€)

1.4

Dólar ($)

Fair Values ($)

Euro (€)

1.34

Dólar ($)

Fair Values ($)

Land

800.00

300.00

1,000.00

800.00

300.00

800.00

300.00

800.00

300.00

Building

3%

2,000.00

4%

700.00

600.00

2,000.00

700.00

2,000.00

700.00

2,200.00

800.00

Acc. Amortization Building

-600.00

-280.00

(net value)

Equipment

10%

1,200.00

12%

300.00

100.00

1,200.00

300.00

1,200.00

300.00

1,400.00

400.00

Acc. Amortization Equip

-400.00

-100.00

(net value)

Investment in Subsidiaries

100.00

100.00

500.00

Good Will

Current Assets

900.00

280.00

200.00

800.00

280.00

800.00

280.00

800.00

280.00

Working Capital variation

4,000.00

1,200.00

1,900.00

Liabilities

Share capital

1,300.00

500.00

500.00

1,300.00

500.00

1,300.00

500.00

1,300.00

500.00

R/E

1,200.00

350.00

350.00

1,200.00

350.00

P/L from Currency variation

P/L

LT Loan

5%

1,000.00

7%

100.00

100.00

800.00

100.00

700.00

150.00

600.00

100.00

ST Liabilities

500.00

250.00

350.00

400.00

300.00

400

550.00

250.00

600.00

300.00

Difference Assets-Liab in Son Co)

600.00

4,000.00

1,200.00

1,900.00

P/L Y1

P/L Y2

P/L Y3

Parent Co

Son Co

Parent Co

Son Co

Parent Co

Son Co

Euro (€)

Dólar ($)

Euro (€)

Dólar ($)

Euro (€)

Dólar ($)

Sales to 3rdparties

2,000.00

400.00

2,500.00

600.00

2,600.00

660.00

Of wich Sales to Pa Co

200.00

300.00

340.00

Cost of goods sold

1,000.00

200.00

1,300.00

300.00

1,300.00

330.00

Other cost

50.00

50.00

60.00

Amortization

180.00

64.00

General Expenses

250.00

50.00

300.00

60.00

330.00

62.00

Dividends from Group C

Financial Expenses

45.00

7.00

Income Tax

30%

157.50

25%

7.25

367.50

21.75

Y0

Y1

Y2

Y3

FACTS

FACTS

FACTS

FACTS

PaCo use to be the best client of SonCo

The fiscal year has been "normal". SonCo sold part of his

The experience has been very satisfactory for both

The former owners of SonCo decide to retire

SonCo is interested in to assure this strategic client and

production to PaCo

companies

PaCo accepts to buy the remaining 35% of Sonco by 400

some SonCo' shareholders propose PaCo to acquire a relevant

PaCo uses FIFO stocks'valuation method

SonCo paid a 300$ divident (to 100% of shares)

interest in SonCo

by Jan 1st. Dividents from abroad are tax free in PaCo

PaCo is the parent company of a large group with a number

50% of the stocks bought from SonCo remain in PaCo

PaCo accepts to buy an additional 40% of Sonco

The purchase was effective Dec 31st Y3

of subs

at year end

by 400€

30% of the stocks bought from SonCo in Y3 remain

PaCo acquires the 25%of Son Co as of Jan 1st Y1 by 100Euro

The purchase was effective Dec 31st Y2

in PaCoat year end

40% of the stocks bought from SonCo in Y2 remain

in PaCoat year end

CONSIDERATIONS

CONSIDERATIONS

CONSIDERATIONS

CONSIDERATIONS

SonCo Functional Currency is US$

Exchange rate has been very stable all year round (1,3)

The $/Euro exchange rate has been declining during

The $/Euro exchange rate has recober during

PaCo's and presentation currency is Euro

the year uniformely.

the year uniformely.

Amortization rates are different in SonCo and Paco

Useful life of the PaCo assets should not be "enlarged"

Consequently, the value of the investment in SonCo

Consequently, the value of the investment in SonCo

The due diligence has fixed different fair values for

B/S should be "balanced" Asset=Liabilities

decreases. Check in your notes how to manage it

increases. Check in your notes how to manage it

SonCo assets¬liabilities

Dividend paid is >results since PaCo investment

The cash flow generated during the year (if any) has been

Remember:B/S should be "balanced" Asset=Liabilities

Remember:B/S should be "balanced" Asset=Liabilities

used for new investments (if any) and the remaining

Also, teh investment is at year end:

Also, teh investment is at year end:

Income Tax rates for PaCo and SonCo

to increase / decrease the working capital

- P/L of the year has to be distributed considering

- P/L of the year has to be distributed considering

will remain fix for thewhole periode of 3 years

Cash flow= net profit+amortization

'the initial share owned

'the initial share owned

Amortization Rates will remain fix for the 3 years

Cash flow +net variation in LT debt =

- But B/S at year end has to consider the new situation

- But B/S at year end has to consider the new situation

Net Invest in fixed or financial assets +Working capital variation

The excess in ST debt relates to provisions (100$)

Check in your notes if good will can increase once

is no longer necessary

you already have the control of the subsidiary

TO DO

TO DO

TO DO

TO DO

1.- Calculate Good (or negative Good) Will at the acquisition date

1.- Complete the individual B/S and P/L based on

1.- Complete the individual B/S and P/L based on

1.- Complete the individual B/S and P/L based on

2.- Decide consolidation method and justify it

the data provided

the data provided

the data provided

3.- Prepare the initial Consolidated Balance Sheet

2.- Prepare the consolidated Balance Sheet (B/S) and

2.- Calculate the effect of the exchange rate difference

2.- Calculate the effect of the exchange rate difference

Profit and Loss (P/L) as of Dec 31st Y1

on the initial B/S

on the initial B/S

3.- Calculate the effect of the exchange rate difference

3.- Calculate the effect of the exchange rate difference

on the P/L of the year

on the P/L of the year

4.- Calculate the additional Good (or negative

4.- Calculate the additional Good (or negative

Good) Will of the new acquisition if applicable

Good) Will of the new acquisition if applicable

5.- Prepare the consolidated Balance Sheet (B/S) and

5.- Prepare the consolidated Balance Sheet (B/S) and

Profit and Loss (P/L) as of Dec 31st Y2

Profit and Loss (P/L) as of Dec 31st Y3