Multigroup, a pharmaceuticals MNE based in Switzerland, decided to prepare consolidated financial statements for the first time. As there were no Swiss legal requirements regarding consolidation, Multigroup had to decide what accounting principles to use for its subsidiaries, joint ventures, and associates around the world. Multigroup's subsidiaries, all majority owned, were located in the United States, the United Kingdom, France, and Germany. A 50 percent-owned joint venture was located in the Netherlands. There were also interests in Associated Corporations at 30, 35, and 40 percent in the United States, the Netherlands, and Japan, respectively. In addition, there had been the recent acquisition of Bizcorp in the United States for a cash consideration of 750 million Swiss francs. The book value of the net assets of Bizcorp at the date of acquisition were 600 million Swiss francs, but at fair value they were valued at 670 million Swiss francs.

problems:

1. Discuss the possible alternative accounting treatments of Multigroup's subsidiaries, making special reference to U.S., U.K. and IASB GAAP. What is your recommended treatment?

2. Discuss the possible alternative accounting treatments of Multigroup's joint venture in the Netherlands. What is your recommended treatment?

3. Discuss the possible alternative accounting treatment for Multigroup's associated corporations. What is your recommended treatment?

4. Discuss the possible alternative treatments of goodwill in the case of the recent Bizcorp acquisition, making special reference to U.S. and U.K. GAAP. What is your recommended treatment?

5. Discuss the likely effects on Multigroup's financial statements of the decisions made concerning the treatment of subsidiaries, the joint venture, the associated corporations, and the recent acquisition. How do you think the securities markets would react to the disclosure of consolidated information?