Arden Co prepares consolidated financial statements to 31 December. On 1 January 2026 it acquired 80% of the equity shares of Belmont Co, a software business. Arden Co measures the non-controlling interest at fair value. Extracts from the draft statements of financial position at 31 December 2026 are below. Arden Co's financial controller has not yet made any adjustment for the notes that follow.

Note 1: Consideration. Arden Co paid $60m in cash on 1 January 2026. It also agreed to pay the former owners a further amount in cash on 31 March 2028 if Belmont Co's profits for 2026 and 2027 together exceed a target. The most payable is $10m; the fair value of the obligation was $4m on 1 January 2026 and $6m at 31 December 2026, the rise reflecting Belmont Co's strong trading in 2026. The draft statements show nothing for this obligation. Arden Co paid legal and due diligence fees of $1.5m on the acquisition and added them to the cost of its investment in Belmont Co. Note 2: Net assets acquired. On 1 January 2026 Belmont Co's share capital was $20m and its retained earnings were $35m, and the carrying amounts of its net assets equalled their fair values except as follows. Belmont Co had relationships with its customers, under contracts, that it had never recognised; their fair value was $8m and their remaining useful life four years. Belmont Co also faced a legal claim from a former distributor. The claim is a present obligation arising from past events, but Belmont Co's lawyers judge that payment is not probable; its fair value was $3m on 1 January 2026, and the position and the lawyers' view were unchanged at 31 December 2026. Belmont Co has disclosed the claim but not recognised it. Note 3: Non-controlling interest. Its fair value on 1 January 2026 was $15m. Note 4: Intragroup trading. In December 2026 Belmont Co sold goods to Arden Co for $8m at a margin of 25% on the selling price. Half of them were still in Arden Co's inventory at 31 December 2026. Goodwill has not been impaired. Ignore deferred tax.