Best Company manufactures skincare products. Lavie Co. supplies hair care products, and Parfum Co. specializes in fragrances.

On 1 January 20×1, Cest Co. paid $290,000 to acquire 55% of controlling interest in Lavie Co., when the fair value of identifiable net assets of Lavie Co. was equal to book value represented by share capital of $100,000 and retained profit of $320,000. There have not been any intercompany transactions between Cest Co. and Lavie Co., except for dividends paid by Lavie Co. to Cest Co.

Assume it is now October 20×2. Best Co. intends to acquire 60% of controlling interest in Parfum Co. on 1 January 20×3, when the fair value and book value of Parfum Co.’s identifiable net assets are projected to be the same and represented by share capital of $200,000 and retained profit of $300,000. The 60% or 120,000 shares of Parfum Co. are to be acquired by paying $336,000 of cash in a single transaction on 1 January 20×3.

However, Cest Co. has not decided whether to directly acquire the shares of Parfum Co. or let its subsidiary, Lavie Co., acquire the shares of Parfum Co.

The companies present annual financial statements with 31 December year-ends and adopt the Singapore Financial Reporting Standards. All the relevant SFRS that was issued by the Accounting Standards Council as of 1 January 2022 are assumed to have been effective on 1 January 20×1.

The group policy is to measure non-controlling interest at the acquisition date based on the proportionate share of the acquisition-date fair value of identifiable net assets of the subsidiary acquired. All dividends are declared out of profit for the year and are duly paid and received. Ignore the deferred tax effects, if any, arising from the consolidation.