FRF7
Syllabus D. PREPARATION OF FINANCIAL STATEMENTS D2a. Preparing group SFP

D2a. NCI on the SFP 5 / 8

Syllabus D2a)

Prepare a consolidated statement of financial position for a simple group (parent and one subsidiary and associate) dealing with pre and post acquisition profits, non-controlling interests and consolidated goodwill.

Non-Controlling Interests

So far we have looked at goodwill and the effect of NCI on this.. Now let’s look at NCI in a bit more detail
(don’t worry we will pull all this together into a bigger question later).

If you remember there are 2 methods of measuring NCI at acquisition:

  1. Proportionate method
    This is the NCI % of FV of S’s Net assets at acquisition.

  2. FV Method
    This is the FV of the NCI shares at acquisition (given mostly in the question).

This choice is made at the beginning.

Obviously, S will make profits/losses after acquisition and the NCI deserve their share of these.

Therefore the formula to calculate NCI on the SFP is as follows:

NCI @ Acquisition x (this is the same figure as used in goodwill*)
NCI % of S’s post acquisition profits/losses x  
NCI on the SFP x  

* This figure depends on the option chosen at acquisition (Proportionate or FV method).

Impairment

S may become impaired over time. If it does, it is S’s goodwill which will be reduced in value first. If this happens it only affects NCI if you are using the FV method.

This is because the proportionate method only gives NCI their share of S’s Net assets and none of the goodwill.

Whereas, when using the FV method, NCI at acquisition is given a share of S’s NA and a share of the goodwill.

NCI on the SFP Formula revised

NCI @ Acquisition x (this is the same figure as used in goodwill*)
NCI % of S’s post acquisition profits/losses x  
Impairment (x) (ONLY if using FV method)
NCI on the SFP x