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ACCA Strategic Professional · Strategic Business Reporting (International) · Group accounting including statements of cash flows

Opal Group acquired 100% of Quartz for cash of $12m during the year. Quartz had cash and cash equivalents of $2m at acquisition date. Quartz's net assets at fair value were $9m and goodwill arising was $3m. How should the acquisition be presented in Opal's consolidated statement of cash flows?

The acquisition is shown as a single investing outflow of $10m, being the $12m cash consideration less the $2m cash and cash equivalents acquired with the subsidiary. IAS 7 requires the net figure, not the gross price or the net assets acquired.

  1. AInvesting outflow of $10m, being the cash paid net of cash acquiredCorrect
  2. BInvesting outflow of $12m, with the $2m shown separately as operating inflow
  3. CInvesting outflow of $9m, being the net assets acquired
  4. DFinancing outflow of $10m, because the acquisition was funded by the group

Explanation

IAS 7 requires the cash consideration net of cash and cash equivalents held by the acquired subsidiary to be shown in investing activities: 12 - 2 = $10m. Showing $12m ignores the cash acquired, and the net assets figure is not a cash flow.

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