4. On 1 January 2010, Guitar Ltd acquired 60% of the ordinary shares of a subsidiary, Banjo Org for £500,000. Banjo Org trades in “potts”. On 1 January 2010 the balance on the accumulated profits of Banjo Org was 160,000 “potts” and the share capital of Banjo Org was 1,200,000 “potts”.

The summary of the statement of comprehensive income and statement of financial position of Banjo Org are given as follows:

The following information is also available:

1. Non-current assets were acquired on 1 January 2010.

2. Opening inventories were acquired on 12 November 2015 and closing inventories were acquired on 15 December 2016.

4. The translated retained earnings brought forward for Banjo Org is £149,250 under the temporal method.

5. Impairment of 15% of the value of the goodwill is to be provided for in 2016.

Required:

(a) When should the temporal and closing rate methods of foreign currency translation be used according to IAS 21?

(b) Translate the statement of comprehensive income for the year ended 31 December 2016 and the statement of financial position as at 31 December 2016 for Banjo Org using the temporal method.

(c) Calculate the goodwill in the consolidated statement of financial position for Guitar Ltd as at 31 December 2016.