Basic groups - Question (NCI @ FV method)

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Basic groups - Question (NCI @ FV method)

  P S
Non-Current Asset 500 600
Investment in S 120  
Current Assets 100 200
     
Share Capital 100 100
Reserves 220 400
     
Current Liabilities 100 50
Non-Current Liabilities 300 250

P acquired 80% S when S’s Reserves were 40.

At that date the FV of S’s NA was 150.

Difference is due to Land.

There have been no issues of shares since acquisition.

P uses the FV of NCI method at acquisition, and at acquisition the FV of NCI was 35. No impairment of goodwill.

Prepare the consolidated set of accounts.

Step 1: Prepare S’s Equity Table

  Now At Acquisition Post-Acquisition
Share Capital 100 100 0
Retained Earnings 400 40 360
Land 10 10 0
Total 510 150 360

Now the extra 10 FV adjustment now must be added to the PPE when we come to do the SFP at the end.

Step 2: Goodwill

Consideration 120
NCI 35 (Given)
FV of Net Assets Acquired (150) from S’s Equity table
Goodwill 5

Step 3: Do any adjustments in the question

: NONE

Step 4: NCI

NCI @ Acquisition 35 (given)
NCI % of S’s post acquisition profits 72 (20% x 360 (from S’s Equity table)
Impairment (0) (20% x 0)
NCI on the SFP 107  

Step 5: Reserves

P 220  
S 288 (80% x 360 (from S’s equity table))
Impairment (0) (80%  x 0)
  508  

Step 6: Prepare the final SFP (with all adjustments included)

  P S Group
Non-Current Asset 500 600 1,110 (including 10 from S’s equity table)
Investment in S 120 Goodwill 5
Current Assets 100 200 300
       
Share Capital 100 100 100
Reserves 220 400 508
NCI     107
       
Current Liabilities 100 50 150
Non-Current Liabilities 300 250 550
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