Several years ago, Fill had purchased an interest of 10% in another mining company. However, over the last two years, Fill has made several other purchases of shares with the result that, at 30 November 20X8, it owned 51% of the equity of the mining company. Fill had incurred significant legal and advisory costs in acquiring control.

The mining company has reserves which contain different grades of coal. As the entity cannot process some high quality coal for several years, contingent consideration for the purchase of the entity has been agreed. On the date that Fill gained control of the mining company, the fair value of the contingent consideration was estimated at $10 million.

The remaining non-controlling interest (NCI) was owned by a rival company. The directors of Fill do not wish to apply FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland to value NCI.

Instead, they want to apply IFRS 3 Business Combinations to fair value NCI for use in the published financial statements. Their rationale for this is that users of the financial statements will get a more realistic indication of the value of the investment in the mining company.

Required:
Advise the directors of Fill on the differences in treatment of the above purchase of the mining company between IFRS 3 Business Combinations and FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. (7 marks)