Working 3 Non-current assets

　　The purchase of property, plant and equipment should be $265 million and the disposal proceeds should be $80 million. This will necessitate an adjustment to the figure for net profit before tax of $45 million for the loss on the sale of property, plant and equipment

　　Working 4 Acquisitions of subsidiary

　　$m

　　Purchase of subsidiary (160)

　　Cash acquired with subsidiary 30

　　(130)

　　Working 5 Cash flows from financing activities

　　$m

　　Issue of ordinary shares (130 sub shares 120) 10

　　Increase in debt (35 sub loan notes 20) 15

　　Repayment of bond issue price (29)

　　Working 6

　　$m

　　Dividends paid 20

　　less minority movement incorrectly shown (9)

　　plus NCI dividend (working 1) 16

　　27

　　Working 8

　　The premium on the bond will be an interest charge shown under cash flows from financing and the repayment of the capital will be shown under financing. The interest charge for the year will be adjusted on cash flows from operating activities and will, therefore, make the interest expense

　　(30 + 10), i.e. $40 million.

　　(b) The framework defines an asset as:

　　“a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity”

　　Goodwill is an intangible asset and as such has no physical presence. Goodwill is acquired on he acquisition of another entity. It is measured as the differences between the fair value of the cost of investment and the fair value of net assets acquired.

　　With the reference to the definition of an asset above, goodwill is controlled by the purchased entity. While it is not an asset that is used in the day to day business of an entity, a specific price has been paid for it and on acquisition of the entity to which the goodwill relates, the investor obtains access to the goodwill inherent in that business.

　　In terms of past events and future benefits, goodwill occurs from the past operation of the business and the specific circumstances that relate to that goodwill. It can occur from the development of an internal brand, from good relationship with suppliers and customers and any other factor that gives the business a value in excess of the book value of its assets.