Changes in the Composition of a Group Example 1

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  1. avatar says


    Sir please let me know if Parents own 55 % and in mid of year it buys further 25% ..AND question says good will is calculated on fair value basis and there is imapirment in year of suppose $1000…so when doing working “3b” we take part of good will as u did (25%/45%) of good will…the goodwill amount to be used for allocation will be post half year imparied amount related to NCI? i.e “impaired goodwill amount” own by NCI * 25%/45%???


    • Profile photo of MikeLittle says

      @syedwaqar, Hi

      I suppose sensibly that the date of the 1,000 impairment is critical here. If a question were to state for example that “At the end of the year in an impairment review the directors assessed that goodwill should be impaired by $1,000″, then our share of that impairment would be 80% and nci share 20%

      If alternatively the question said that “2 months before the 25% further acquisition, the directors determined that goodwill needed to be impaired by $1,000″ then the allocation would be 55% / 45%

      But that surely would be strange! It’s my understanding that the annual review for goodwill impairment takes place at the end of the financial year. If so, then it’s going to be an 80% / 20% split

  2. avatar says

    HELLO! Mr.Little!!
    Sir please let me know that if parent have initial 15% investment and then it buy’s further 60%….
    there is going to be a gain/loss to PARENT on deemed disposal…that gain/loss is going to be reflected in retained earnings of PARENT….


    • avatar says

      @1416785, He did it on a proportional basis based on cost of investment.
      (520,000 / 60% x 15%)
      However he said the fair value of original investment will likely be given in an exam, so you would not need to do this in exam. He forgot to add it to the question

  3. avatar says

    Hi in W2 – if the NCI is valued at $200k, and the NCI have 25% (after A shareholding increases to 75%), couldn’t we then assume total value is $800k (4×25%)? Wouldn’t this then mean the FV of the original 15% would be the balancing figure – ie $80k?

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