Before the date of control, Margrett should Josey is accounted for using equity method, where

the investment in associate is adjusted with share of post acquisition reserves of Josey. Such
equity method is used until Margrett achieves control in Josey, where consolidated goodwill is
calculated, with Joseys net assets are fair valued at date of acquisition (for consolidation
purpose).
Cash consideration is measured at its face value, equity consideration is measured at fair value of
the acquirers shares at date of transfer the instruments.
Transaction costs from acquisition may be capitalized within investment in subsidiary in the
separate financial statements of Margrett, but such transaction costs must be recognized to profit
or loss or within equity in the consolidated financial statements.
At date of acquisition, if the acquirer has obligation to compensate the employees of acquiree
using share options, such compensation is treated as additional consideration transferred. In th
case of Margrett, the option granted seems more to retain the managements service rather than
to secure the purchase of a subsidiary. The issue of option will be accounted for using share
based payment rather than business combination.
Contingent consideration is a payment which depends on prescribed conditions. Contingent
consideration could be debt or equity in nature. For equity in nature, no subsequent
remeasurement is allowed. For debt in nature, any subsequent remeasurement is to be recognized
to profit or loss. Contingently issuable shares where the unit is not fixed is a financial liability.
Margrett should measure the consideration transfer at the fair value of the liability at date of
acquisition.
Internally generated intangible assets normally fail the recognition criteria, as the measurement is
not reliable. However, such assets must be recognized to the consolidated financial statements at
their fair value at date of acquisition. Such recognition will lower the goodwill recognized. In the
post acquisition, normally accounting such as measurement model selection, amortization and
impairment are applied.
Full or partial goodwill are accounting policy choices rather than mandatory features. Each
model may be applied to subsidiary on a case by case basis. Full goodwill will result a higher
asset to be recognized in the group, and consequently higher impairment loss on goodwill, if any.
However, impairment testing for full goodwill is easier as no re-gross is needed.
Nature of consideration should not affect the goodwill calculation, as the considerations are
measured at fair value, which represent the value of the exchange. However, if a non financial
asset is used as consideration, and it is transferred to subsidiary, such consideration is measured
at carrying amount of transferor asset rather than fair value. Also, the measurement period of 12
months do not applied to contingent consideration, which could make a difference if other form
of consideration is used.

In order to recognized a reorganizational provision, the entity must have present obligation, with
a probable payment which can be estimated reliably. These are evident by detailed approved plan
and public announcement. In the case of Margrett, if the activity is carried out voluntarily, the
provision is not appropriate at date of acquisition.