Ham plc acquired 100% of the common shares of Burg plc on 1 January 20X0 and gained control. At that date the statements of financial position of the two companies were as follows:
| Ham £000 | Burg £000 | |
| ASSETS | ||
| Non-cur rent assets | ||
| Property, plant and equipment | 250 | 100 |
| Investment in Burg | 90 | |
| Current assets | 100 | 70 |
| Total assets | 440 | 170 |
| EQUITY AND LIABILITIES | ||
| Capital and reser ves | ||
| £1 shares | 200 | 100 |
| Retained ear nings | 160 | 10 |
| 360 | 110 | |
| Current liabilities | 80 | 60 |
| Total equity and liabilities | 440 | 170 |
Notes:
1 The fair value is the same as the book value.
2 £15,000 of the negative goodwill arises because the net assets have been acquired at below their fair value and the remainder covers expected losses of £3,000 in the year ended 31/12/20X0 and £2,000 in the following year.
Required:
(a) Prepare a consolidated statement of financial position for Ham plc as at 1 January 20X0.
(b) Explain how the negative goodwill will be treated.
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