Financial Report Template (Page 68 of 80) in pdf

Financial Report Template Page 68

NOTES TO THE FINANCIAL STATEMENTS

(CONT)

FOR THE YEAR ENDED 30 JUNE 2015

NOTE 34 BUSINESS COMBINATIONS CONT.

The goodwill recognised is primarily attributed to the knowledge and practises of the Emanate staff in continuing to run a successful

business. The goodwill is non-deductible for income tax purposes. The fair value of the ordinary shares issued as consideration was

calculated with reference to their market price on the date of acquisition, which was $2.45.

The fair value of trade receivables is deemed to be their gross value. No credit losses are expected. The fair value of work in progress

(WIP) was estimated based on a detailed review of open case files at the acquisition date. The gross value of the WIP was recorded

with a provision for unrecoverable WIP recognised based on historical recovery rates.

As part of the agreement with the vendor, amounts of contingent consideration have been agreed subject to the achievement of

certain performance hurdles over the two years from acquisition date:

a) Year 1: up to $1,000,000 if earnings before interest and tax exceed $3,800,000 (payable proportionally between $3,000,000

and $3,800,000)

b) Year 2: up to $1,000,000 if earnings before interest and tax exceed $4,200,000 (payable proportionally between $3,400,000

and $4,200,000)

c) Year 2: Additional $1,000,000 if the pipeline of future billable work at the end of 24 months from acquisition date exceeds

$15,000,000.

At the acquisition date the fair value of the contingent consideration was estimated to be $2,759,691 determined using the DCF

method. The valuation was calculated assuming the maximum earnings payouts become due and a pipeline value of $16,000,000,

discounted at a rate of 5.16%.

Transaction costs of $108,165 have been expensed and are included in Other Expenses in the Statement of Other Comprehensive

Income, and form part of Investing cash flows in the Statement of Cash Flows.

From the date of acquisition, Emanate has contributed $8,717,184 of revenue and $4,255,511 to the net profit before tax from the

continuing operations of the Group. As a result, subsequent to the end of the financial year, the full amount of the year 1 contingent

consideration was paid to the vendor.

SHINE CORPORATE LTD | FINANCIAL REPORT | 2015

Financial Report Template Page 68