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maliksadiq1 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

miller215 says

No Danius in this one? Think your on a different question. Possibly example 4 in the changes in composition lectures?

miller215 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.

prateshramjohn 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.

prateshramjohn 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?

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

prateshramjohn says

@MikeLittle, Well thanks for clearing that up. Yep, Its unfair. but I’ll make my case after I qualify, for now, Its “do as I say”. 🙂

Thanks Mr. Little.

doctork 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.

hamzahmoazzam says

I have the same query as lyny6. Why impairment of goodwill of L is fully charged to group and not 60% to group and 40% to NCI ?

MikeLittle says

@hamzahmoazzam, Am I not correct that Liene’s nci is valued on a proportional basis and therefore teh nci will not be charged with any goodwill impairment?

lyny6 says

I am not clear at the point of calculating of consolidated retained earnings: why goodwill impairment in L, we minus the total goodwills there, i.e. 400 and 1400. . Please more help!

sharon0709 says

I find that using fraction for computation of NCi is a bit confusing, is there any other alternative of computation?

MikeLittle says

@sharon0709, No! Decimals come out as “awkward” figures – get used to fractions!

chamaandrew says

on working 1, were did the 10/15 come from? i dont seem to see it in the quetion.

2128liang says

@chamaandrew,

K invest $400 on L, each share of L cost $2. therefore K bought 200 shares out of L’s 300 shares.

chamaandrew says

@2128liang, Thanks for clarifying

hui ching says

K acquired 200 shares in L while A acquired 40 shares in L. so should be left 60 shares, which means this is not wholly owned sub. why we use 60%(100% minus TNCI 40%) to calculate A’s share in L for W3? there is still 60 shares for NCI in L. anyone can help me to clarify this matter?

thanks. 🙂

nilanitamber says

@hui ching, hi we are using 60% to calculate A’s share in L, because A owns in L already directly 2/15 and indirectly A owns in L 7/15 (=10/15 * 70%). Together the total shares owned by A in L is 60% (= 3/5 = 2/15 * 7/15).

hui ching says

@nilanitamber, thanks a lot 😉 i totally forgot about indirect thing…

jie8503 says

Dear sir,

when calculate goodwill for K in L, the cost of investment of K in L is $280K, which is 70% of $400K. However, the consideration paid by K to L is total $400K to buy 70% of L’s share, so the cost of investment of K in L should be the total amount of $400 which has already represent 70% of share in L. why do we still need to time the proportion of K’s shares on L of 70% in calculating goodwill of K in L

studynotes says

@jie8503, As far as i have understood the cost of Investment of K in L is $400 and K has acquired 10/15 (66.7%) of L. So K’s Goodwill in L is 570*66.7%= $380 while the Group share is $380*70%= $266. (Group Share: A has acquired 70% of K)

7suleo11 says

can someone please explain how he got k’s share in L as 10/15 (i.e 200 out of 300

MikeLittle says

@7suleo11, Hi, read the rest of this string – others have explained it!

ricky2max says

In the video 70% of the net assets($750k x 70% = $525k) of kristina is deducted from the the consideration to calculate the goodwill. Usually the full 100% of net assets is deducted as previous examples show. Why are we now taking 70%? Is it because it is D shaped? BPP deduct 100% net assets for D shaped groups.

Thanks

osru says

@ricky2max,

Hi Ricky

No its nothing to do with D shaped structure. i was well confused about this as well. but I think its “whether the company’s policy is to value NCI on a PROPORTIONAL BASIS (partial goodwill) or FAIR VALUE BASES (which is full goodwill)” . For proportional basis we take % of net assets to goodwill calculation as shows on this example. (read last line of the question). we take the full net asset figure to GW calculation if its fair value basis.

Please correct me if im wrong.

Thanks

mukhayarah says

Hi,

I still am confused about the DNCi is it =15-2-10 and INCi should be =30 % of 10/15 understandable? but what are the calcs for dnci?

MikeLittle says

@mukhayarah, As you suggest, it’s 15 – 2 – 10 = 3/15 = 20%

tobiholloway says

pls i am confused on 2/15, of A in L and the Direct and indirect non controlling interest. can someone please help?

harripool says

@tobiholloway,

Shares in L total 300, of which 40 shares were bought by A. The greatest common factor of both these numbers is 20, therefore (300/20 =15) (40/20 =2) = 2/15

Since 200 shares have been bought by K, the DNCI attributable is equal to 30% x 67% (or 10/15) which is 20%. Therefore 20% of 15 is 3 (or 3/15). Long winded I know!

victoria02 says

Consideration paid by K to L is $400K and the question says that there were no other investments held by any of the 3 companies, thus all investment held by K relates to L. The price per share was $2, thus the total shares purchased equal to 200K ($400K/$2) and the shareholding is 67% (200sh/300sh).

cooper1982 says

@victoria02, many thanks dear!!

bahram says

how did he come up with how much shares did K own in L :s iam confused

victoria02 says

Hi! I have one query: why do we account only for our (Anda’s) share in consideration for accquisition of a sub-subsidiary (Liene) in goodwill calculation (70%*$400K) since we consolidate a 100% of sub-subsidiary?

mary Cawley says

I got it…about the painting…wasnt thinking when i posted it

mary Cawley says

Mr Little…what has the investment of $68k on an original painting by a local artist to do with A in L investment…am lost…not even a clue sir!!

neilbass says

ok thanks – sound improved as it went on I think. I hadn’t realised they weren’t the Dec exam ones when I started so may watch the earlier ones back again in case things have changed.

Fantastic free resource by the way – I will be spreading the word 🙂

neilbass says

where did the other lectures go? I think it was better being able to see the lecturer in the corner, also sound quality was much better on the previous version

admin says

you can find old P2 lectures here: http://tv.opentuition.com/categories/13/OpenTuition-ACCA-P2-Channel

we have updated P2 lectures with latest recording, for Dec exams

You can watch lectures in full screen, so it should not be a big deal where the video of the tutor is,

sorry, re sound, nothing we can do about it, use headphones 🙂