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Dear Mr Mike
May i ask why is the answer for company “Option” ..Everything is halved, for example Revenue was 70 from question, but the answer showed 35, is there something i have missed?
Thanks
Maybe this is what you missed ……”On 1 November 2013, Marchant disposed of a 40% equity interest in Option” So, from a 60% subsidiary, half way through the year it became a 20% associate.
Therefore consolidate for the first 6 months and equity account for the last 6 months
OK?
hmm i still don’t get it..If the 40% disposal is equal to throughout the year, 6 months = disposed 20% , then at the first 6 months should left 40% interest in the subsidiary ..
I think my concept is wrong..Could you please point it out the correct solution for calculating the interest % in the subsidiary?
Thanks
The parent bought 60% and sold 40% half way through the year. For the first half year Option was a subsidiary. For the second half year Option was an associate
I have no idea what this means ….”disposal is equal to throughout the year”
Hello Mike
Now i get it..so the first half year was a subsidiary , so the calculation for calculate the profit and loss is halved, but if the question changed a little bit to the consolidation date to 2nd half year, then we will be doing the calculation based on equity method right? Since it is an associate that time
If we go from subsidiary to associate, as in this question, then first half year is consolidated
Conversely if we go from associate to subsidiary, then the second half year will be consolidated
oh wait now i really get your meaning …The real reason behind for the figures being halved is because Option was acquired at 1 December, and consolidated at 30 April next year, the figures like 70 shown in the question is whole year’s figure..
And combine with your concept..thats the reason why we should record all the figures in half instead of full
Is this correct?
Thanks
WHAT???
“is because Option was acquired at 1 December” the question tells you that the investment in Option was on 30 April 2012!
“Marchant acquired 60% of the equity interests of Option, a public limited company, on 30 April 2012”
The figures that we’re given are for the year ended 30 April 2013 and the investment in Option was reduced half way through the year on 30 November, 2013
“On 1 November 2013, Marchant disposed of a 40% equity interest….”
The full year’s figures for Option would be consolidated in full if Option had been a subsidiary fort he full year. But it wasn’t. It was a subsidiary for only half the year …. so we’ll consolidate only half the figures
Yep thats what i meant..sorry messed up the date as i did not bring the questions with me when i am typing here ..My bad
Yes its because half of the year was still a subsidiary ..So April 30 2013 —> November 1 2013 is a sub
and the figure given there was meant for 30 April 2013->30 April 2014 , so let say the revenue was 70 , then it is halved
Sorry for confusing you ..Thanks for the explanation..And your patience
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