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Where the reorganisations cost were not announced, in the SOCI the costs of $1000 have not been shared to the NCI. Why? The answer in the notes says $533 relates to the NCi and 4800 to the owners of the parent.
If i share the reorganisation cost , then NCI is $533 less 40% of the provision of $1000, whuch comes to $133. Is this not the way we tackle all PUP adjustments occurring in the sub adjusted time apportioned profit after tax?
I would be grateful for any assistance to untangle this problem.
The whole point about this exercise is the importance of the timing of the announcement.
If the announcement had been made as at the date of acquisition, then provision would have been correctly accounted for.
But where the announcement is NOT made as at date of acquisition, then the obligation doesn’t exist as at that date so the full cost of the reorganization falls into the post-acquisition period
Is that ok?
Thank you for this quick response and the wonderful live lectures!!!!I have fully practiced by solving example 4 at least many times and watched the lecture twice. But at the end I fell into this trap of trying to share the provision to the NCI and then that left me confused as to why the NCI was spared from this share of the cost.
But I will skip that line of thought and stick to the importance of the timing of the announcement.
The nci is hit by the provision where the provision relates to the post acquisition period. Where the whole of that $1,000 is charged against the post acq profits, that reduces the retained earnings for the post acq period and that, in turn, reduces the amount attributable to the nci.
If the provision were taken as a pre-acq deduction, then that inclusion as a deduction from retained earnings at date of acquisition will increase the value of goodwill as at date of acquisition. In this situation, where the nci is valued proportionately, the fair value of the S net assets @ DOA will be lower and, again, the nci gets hit by their share
Better?
Thank you very much as now I am reflecting Working (W4B SOCI) which is their NCI share of this yrs profit plus their share of the post acq cons ret ears. The cons ret ears contains all the provision adjustment which has included $1000 cost.
However is there a possibility that we can have any PUP adjustment to the nci share of this yr profit in W4B SOCI?
Oh!! Now got it! Thanks sir and much appreciated!! the adjustment is already there in the income statement and therefore i can not do it twice in W4B SOCI.
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