# Changes in the Composition of a Group Example 4

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1. says

Dear Mike,

Kindly explain why the fair value of the investment retained is 350k in W3B? Thanks

2. says

There is something major wrong with the solution given in the video ..First of all,Raimonda sold 60 percent of its 80 percent holding in Dainius..according to the solution in the video,R then is left with 40 percent which I say is wrong because it sold 60% of 80%,not 60% of 100%.This means it sold 60% * 80% which is 42% sold and therefore it is left with 80% minus the 48% sold which is 32%..In the printed solution,they use 32% which correct.So I feel the video solution is misleading as it is saying 40 holding left after disposal.

Secondly,in the question the FV of the remaining investment is given as \$250 000 hence no calculation required for this but in the video they are using \$350 000 as the FV of remaining investment…I’m soooooo confused

3. says

in the note
R sold 60% of the investment in D for \$350000
but in the video , 40% is used , how does this come ?

• says

The lecture note actually stated Raimonda sold half of the investment in Dainius. So half of 80% is 40%. Therefore 40% is used.

4. says

In example 4 w3b you put down 80% off 690625 was sold. I thought they only sold half which would be 40% off 690625. I was guessing it’s as a result of them crossing the barrier and becoming an associate. I’m not sure please help clarify this

• says

@aujula, We sold all(technically) and brought back the investment at FV. Which is why the FV of 350k is included. Read the handout and look back at the set formula.

5. says

Just wondering how you split the RE and got 492. I understand about the 9mnths and 3mnths but i assumed I apportioned 500 between them, where did the eight go

• says

@eoglasain, Its ok. I figured it out. But just incase anybody else is wondering.
37,500 is this years profit. you need to divide and apportion that between both time periods. So:
37,500/12= 3125. * 3= 9375. That figure minus retained earnings 500,000= 490,625

6. says

Hello,
Why is it that in example 3 (D and L) the loss on the disposal (£137,500) from working 3b was not included within retained earnings, but in this example, the gain (£127,500) has been included?
Thanks.

• says

@emilyhudson, I have the same question. I guess that because in example 3, neither the parent keep the control nor association. Thus, the consolidated statements are the statements of the parent. It no longer invest in L, so the pre-disposal interest in L is also nil. Am I right?

• says

@c0olmat3, vmngoc above is correct

• says

@irusikzolotusik, I don’t have it in front of me but didn’t we sell half of our investment? And didn’t that investment cost us 500,000?

If so, that’s where the 250,000 comes from – it’s half if 500,000

• says

@MikeLittle, Dear Mike, thanks for your lectures. It helps me understand more clearly on consolidate and know how to do it. Just a small question about difference between Example 3 and example 4. When calculating retain earning, in example 3 (D and L) the profit in the parent was used while in example 4, the profits in the group was used.

I guess that because in example 3, neither the parent keep the control nor association. Thus, the consolidated statements are the statements of the parent. It no longer invest in L, so the pre-disposal interest in L is also nil. Am I right?

• says

@nataliamkl, No, but I always do it it MAY be taxed and the tax figure carries down into W3B

7. says

Mike,
everybody needs to know what would be the value of investment in associate ( on equity bases) in SOFP
I guess its cost of remaining investment + share of retained earning since became associate right?
if yes can you put numbers is it here?

8. says

thanks you for doing it first together and then separate for BF and CF .
Cox in previous exam it was quiet confusing , don’t know about other but for me it was,