(a) Teapot Co
Matters:
– Materiality of the goodwill
– Purchase price/consideration to be at fair value
– Risk of understatement if components of consideration not included
– Non-controlling interest at fair value – determination of fair value if Teapot Co is listed
– Non-controlling interest at fair value – determination of fair value if Teapot Co is not listed
– Use of fair value hierarchy to determine fair value
– Risk that not all acquired assets and liabilities have been separately identified
– Risk in the measurement of acquired assets and liabilities – judgemental
– Additional depreciation to be charged on fair value uplift
– Group accounting policies to be applied to net assets acquired on consolidation
– Impairment indicator exists – fall in revenue
– Impairment review required regardless for goodwill
– Risk goodwill and Group profit overstated if necessary impairment not recognised
– Loan – initial measurement at fair value
– Loan – subsequent measurement at amortised cost
– Risk effective interest not properly applied – understated finance cost and liability
– Risk of inadequate disclosure in relation to financial liability

Evidence:
– Agreement of the purchase consideration to the legal documentation, and a review of the documents
– Agreement of the $75 million to the bank statement and cash book
– Review of board minutes for discussions relating to the acquisition, and for board approval
– A review of the purchase documentation and a register of significant shareholders of Teapot Co to confirm the 20% non-controlling interest
– If Teapot Co’s shares are not listed, a discussion with management as to how the fair value of the non-controlling interest has been determined and evaluation of the appropriateness of the method used
– If Teapot Co’s shares are listed, confirmation that the fair value of the non-controlling interest has been calculated based on an externally available share price at the date of acquisition
– A copy of any due diligence report relevant to the acquisition, reviewed for confirmation of acquired assets and liabilities and their fair values
– An evaluation of the methods used to determine the fair value of acquired assets, including the property, and liabilities to confirm compliance with IFRS 3 and IFRS 
– Review of depreciation calculations, and recalculation, to confirm that additional depreciation is being charged on the fair value uplift
– A review of the calculation of net assets acquired to confirm that Group accounting policies have been applied
– Discussion with management regarding the potential impairment of Group assets and confirmation as to whether an impairment review has been performed
– A copy of any impairment review performed by management, with scrutiny of the assumptions used, and re-performance of calculations
– Re-performance of management’s calculation of the finance charge in relation to the loan, to ensure that effective interest has been correctly applied
– Agreement of the loan receipt and interest payment to bank statement and cash book
– Review of board minutes for approval of the loan to be taken out
– A copy of the loan agreement, reviewed to confirm terms including the maturity date, premium to be paid on maturity and annual interest payments
– A copy of the note to the financial statements which discusses the loan to ensure all requirements of IFRSs 7 and 13 have been met