Business growth options

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INTRODUCTION

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the aim of accomplishing a particular task. This task might be a new project or any other business activity. During a joint venture, each of the participants is accountable for profits, losses and costs related to it. Nevertheless, the venture is its own entity, separate and aside from the participants' other business interests. Although Joint ventures represent a good way to pool capital and expertise and decrease the exposure of risk to all involved, they do present some distinctive challenges as well.

Business combination

A business combination is a transaction in which the acquirer acquires control of another business (the acquiree). Business combinations are a regular way for firms to grow in size, instead of growing through internal activities. Business combinations refer to transactions in which one firm gains control, or at least controlling interest, in another firm. A business combination can be competently described as amalgamation of the assets of two or more business organizations for their consolidation as a sole entity under single ownership. It can be managed simply through the way of a voluntary acquisition, a merger, or an aggressive takeover. In several cases, a preferred technique of managing a business combination might be obtaining a controlling amount of stock.

Amalgamation

The combination of one or more firms into a new organization, the merge or consolidation of corporations. An amalgamation is different in nature from a merger, for that reason neither of the combining companies survives as a legal entity. Preferably, a completely new organization is formed to house the joined assets and liabilities of both companies.

  1. Group Structure Diagram

80% on 1 January 2013

75% on 1 January 2012

Group: Swing Design

Direct interest 80% 60% (75% x 80%)

Indirect interest 20% 40%

100% 100%

  1. Net Assets of Subsidiaries

acqn BS post acqn acqn BS post acqn

(Pounds) ‘000 ‘000 ‘000 ‘000 ‘000 ‘000

1 Ordinary shares 500 500 - 300 300 -

Share premium 100 100 - 50 50 -

Retained earnings 400 650 250 300 500 200

Adjustments on inventory:

Swing to Jing - (6) (6) - - -

Design to Jing - - - - (4) (4)

1000 1244 244 650 846 196

  1. Goodwill on Consolidation Asset as at 31 Dec 2014

Swing Plc. Design Plc.

(Pounds) ‘000 ‘000

Cost of investment

Direct 1220 576 (720 x 80%)

(-) share of net asset

Acqn date (1000x80%) (800) (390) (650 x 60%)

Goodwill 400 186

(-) goodwill impaired (168.00) (74.40)

252.00 111.60

Good impairment

Swing Plc. 420 x 40% 168.00

Design Plc. 186 x 40% 74.40

  1. Non-controlling interest as at 31 Dec 2014

(Pounds) ‘000

Share of Swing Plc net asset at balance sheet date 1,244x20% 248.00

(-) share of cost of investment in Design Plc (720x20%) (144)

104.8

Design Plc:

Shares of net assets at balance sheet date 846 x 40% 338.4

443.2

  1. Group Retained Earnings as at 31 Dec 2014

(Pounds) ‘000

Jing Plc 600.00

Swing Plc (244 x 80%) 195.20

Design Plc (196 x 60%) 117.60

912.80

(-) Goodwill impairment

Swing Plc (168.00)

Design Plc (74.40)

670.40

  1. Consolidation statement of financial position of Jing Plc. and subsidiary companies as at 31 Dec 2014

Non-Current Assets (pounds) ‘000

Goodwill (252 + 111.6) 363.60

Land (500 + 400 + 600) 1,500.00

Other non-current assets (600 + 200 + 300) 1,100.00

Current Assets

Inventory (109 + 76 + 68 - 6 - 4) 243.00

Account receivables (197 + 125 + 84 - 56.9 - 28) 321.10

Cash in bank (54 + 19 + 28) 101.00

Cash in transit 11.90

3,640.60

Capital and Reserves

Ordinary share capital 1,500.00

Share premium 300.00

Group retained earnings 670.40

Non-controlling interest 443.20

Non-Current Liabilities

5% redeemable preference shares of Design Plc. 100.00

Current Liabilities

Account payables (280 + 290 + 130 – 45 – 28) 627.00

3,640.60

Reference

(2014) Organizational Theory, accessed at http://www.investopedia.com/terms/j/jointventure.asp

(2011), Business Combination, accessed at http://www.readyratios.com/reference/accounting/business_combination.html

(2014), Business Combination, accessed at

http://www.accountingtools.com/dictionary-business-combinatio

(2014) Amalgamation Definition, accessed at

http://www.investopedia.com/terms/a/amalgamation.asp