Alcuin  Langwith     Halifax           £000         £000         £000 Assets       Non-current assets       Property, Plant and Equipment  (note 1) 10,500 5,500

Alcuin, Langwith and Halifax are firms involved in the production and sale of high-quality technical equipment for universities; the following are draft financial statements:

Statement of financial position as at 31st March 2021

Statement of profit and loss for the accounting period ending 31st March 2021

Notes to the accounts:

1. On 31^st March 2021 Langwith entered into a four-year lease contract for a new machine used in the production with a contract requiring the payment of £14,930 per annum in arrears. This does not appear in the accounts above. The interest rate implicit in the lease is 7.5% and Langwith uses the actuarial method to allocate interest for finance leases. The Langwith’s depreciation policy for these assets applies the straight-line method over four years and there is not thought to be a residual value of the asset at the end of this period.

1. Alcuin Ltd acquired two million of the ordinary shares of Langwith Ltd on 29^th November 2014 when the retained earnings of Langwith Ltd were £1,000,000.
2. Alcuin Ltd acquired 75% of the ordinary shares of Halifax Ltd on 7^th September 2016 when the retained earnings of Halifax Ltd were £500,000; Alcuin use the proportionate share (‘partial’) method of valuing the non-controlling interest in Halifax. 
3. During the year goods with an original cost of £400,000 were sold by Alcuin to Langwith for £600,000. Half of these goods are in Alcuin’s inventory at the year end.
4. On 1^st October 2020, Halifax sold units with a total sales price of £500,000 to a single large customer. Included in the contract was a two-year service warranty covering all required repairs during this time. The normal selling price of the same merchandise would be £400,000 without the warranty. As of 31^st March 2021, Halifax recognised £425,000 of revenue, included in the above accounts.

Required:   

The Managing Director of Alcuin is confused about the why the investments in Langwith and Halifax do not appear on the financial statements at the group level. Write a note explaining the treatment here and advising on the treatment of goodwill.