June 11 – Rose (acquisition of further interest)

Hello,

I was going through the thread https://opentuition.com/topic/q1-june-2011-rose/ but I couldn’t clearly follow the advice given, so I apologise if this is a repeat thread, but I thought it would have been better to start from scratch.

I can follow the answers in the answer booklet and the logic behind them, but the reasoning is still a mystery.

So the FV of the NCI at initial acqn date 46
increase in net assets 2.1
total net assets value at further acqn date 48.1

how I worked the answer out was
consideration (for 10%) 19
fv NCI (for 20% out of 30%) (48.1 x (2/3)) 32.07

Less NA (48.1)

Goodwill 2.97

the answer states that this is a negative movement in equity – i thought this would be attributed to goodwill :S. why is this so? in the question of grange (Dec 09) it is attributed to goodwill.

Mike you said (in the aforementioned thread) “In my workings, we acquire the extra %age of the fair valued net assets + the appropriate value of the goodwill. Now, I can see that that will not be the same as the nci fair value at date of acquisition + their share of post-acquisition profits – their share of any goodwill impairment (it WILL be the same if the nci had originally been valued on a proportional basis)”. I was not too sure what this was referring to (as another example was used to demonstrate an idea), but I feel like it is probably very important.

Sorry for the lengthy post, if anyone needs further information, please ask and Ill do my very best to provide.

Thank you for taking the time to view my post and help me with my answer.