You work for an accountancy firm. You have been asked to provide advice to clients about the following transactions: On 1 October 2022, Shikipisha, a listed company, purchased 90% of the ordinary shares of Allan. Allan, which ceased trading one week prior to the share purchase, owns a manufacturing facility comprising of land and buildings as well as related equipment. The fair value of the land and buildings is similar to the fair value of the equipment. The acquisition of Allan only gained legal approval on the basis that all employees who worked at the facility are retained. There are no other assets, including any inventories, or processes transferred as part of the sale. Shikipisha proposes to account for the purchase of Allan as a business combination. Required: Advise whether the proposed treatments of the above two transactions are in accordance with IFS Standards
You work for an accountancy firm. You have been asked to provide advice to clients about the following transactions:
On 1 October 2022, Shikipisha, a listed company, purchased 90% of the ordinary shares of Allan. Allan, which ceased trading one week prior to the share purchase, owns a manufacturing facility comprising of land and buildings as well as related equipment.
The fair value of the land and buildings is similar to the fair value of the equipment. The acquisition of Allan only gained legal approval on the basis that all employees who worked at the facility are retained. There are no other assets, including any inventories, or processes transferred as part of the sale.
Shikipisha proposes to account for the purchase of Allan as a business combination.
Required:
Advise whether the proposed treatments of the above two transactions are in accordance with IFS Standards.
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