On July 8, 2013, LVMH acquired 80% of Loro Piana for $2.8 billion, with the remaining 20% held by the Loro Piana family. The document requests calculations for noncontrolling interest and goodwill using both the proportionate share and fair value methods, along with an assessment of Loro Piana's net assets and goodwill for LVMH's finances at the end of 2016, following a decline in sales. By the end of 2016, Loro Piana's estimated recoverable amount was $2.7 billion.

1. Please include formulas
This problem is based on a real acquisition. On July 8th,2013 LVMH purchased 80% of Loro Piana
(luxury Italian cashmere brand) for $2.8 billion. The fair value of Loro Piana's identifiable assets
and liabilities on that date were as follows: The remaining 20% interest remained in Loro Piana
family's hands. Part I - Required: 1. LVMH applied the proportionate share method to account for
its acquisition of Loro Piana. How much noncontrolling interest and goodwill did LVMH recognize
on July 8th,2013? 2. How would you change your previous answer if LVMH applied the fair value
method? At the end of 2015 the book value of Loro Piana had risen to $3.8 billion due to favorable
conditions. However, in 2016 Loro Piana suffered a steep decline in sales due to decreased
demand of the Asian market. At the end of 2016, LVMH top executives estimated the recoverable
amount of Loro Piana to be $2.7 billion. Part II - Required: 3. At what amount should Loro Piana's
identifiable net assets and goodwill be reported on LVMH's consolidated financial statements at
the end of 2016 ? Assume that the amount of Loro Piana's goodwill did not change since the
acquisition date.