More Complex Group Structures Example 4 part a

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  1. avatar says

    Dear Sir
    In the example 4…..Cost of Investment (W2) is 500,000. But dont you think that Investment in Danius in SFP dated 30 June 2009…which is after disposal(31 march 2009)….so that 500,000 represents 40 % of investment….am I right Mr. Mike..?
    if I am then the cost of investment in W2 would be 1000000 ?

    Plzz reply sir
    Thanks alot in advance

  2. avatar says

    Hi Mr Little,

    Not sure if this has been mentioned before but just something I have started doing just for my own working out purposes and thought I would run it by you. During working 3 for consolidated retained earnings just after deducting pre acq profits you total it and then apportion our share as a %. While this works and is what I started with I have since started instead of apportioning our % but deducting the nci % and making a new total in the subsid column (which is our share) and then moving it to the holding company column. For example in the above lecture we get post acq profits in K as 600 then you multiply by 70% to put 420 in the holding column. Instead I have 600 then deduct nci share of 30% being 180 and totalling to 420 which I then move to holding column. I find it useful as it works out ‘their share post acq retained’ ready for later workings at the same time.

    Just a thought :) would this seem acceptable? I know your far wiser than me :).

    Many thanks. Paul.

  3. avatar says

    Hello Mr. Little,

    I have one issue with this question. Why is it that we attribute 5.1k as an impairment when they have goodwill of 15. With that goodwill, then they should be charged 15*20%=3. And we, would be charged 70*20%=14.

    It adds to the same 17 of total impairment, but it seems flawed that we charged them more impairment than they should be, since it has been identified how much goodwill is attributable to the NCI.

    • avatar says

      @prateshramjohn, This would in turn affect the Ret. Ears and the NCI.

      Impairment charged to Ret Ears = 14000+1400+400=15800. Giving Ret Ears = 1578k-15.8k=1562.2k

      and NCI = 225k + 180k + 15 – 3 – 120k = 297k

      This would be the only affected values and the CSoFP would balance none the less, as the changes was simply increasing NCI and reducing Ret Ears.

      What do you think?

      • Avatar of MikeLittle says

        @prateshramjohn, Hi

        I think you’re wrong! When the nci is valued on a full, fair value basis – that is, they have some goodwill attributable to them, then any impairment is divided on the basis of the proportionate shareholdings

        I too thought the way are thinking but I too was incorrect. When I first did the “Mini exercise, I allocated goodwill against the nci until they had no goodwill left to be impaired and the balance went to the parent company. But I was wrong

        Additionally, the concept of calculating the nci attributable goodwill ( if the amount is not given in the question ) is apparently a redundant idea. Goodwill is calculated as an overall amount following the layout which I have now adopted – and that’s the layout approved by both Steve Scott at F7 level and by Graham Holt at P2 level

        And you’re correct – it does seem unfair

        But, there again, life is

  4. avatar says

    Peterb said:

    The $68 forms part of As’ total invesments of $743 and so in working out his investmet in L the $68 must be eliminated therefrom. on’t forgt that A’s total investment is made up of the 350 sares @$1.7 in K plus the painting plust the investment in L. Thusby a process of elimination or by working backwards you arrive at A’s inv in L.

    Trust that this was of some help.

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