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  1. Hi,

    Thanks for the lecture! In the first video in this chapter you said that in working #3 Goodwill when calculating the FV of NCI for SS it is based on the effective control for the parent. In this case it would be 56% of $20,000. But you did not take 56% you used the full $20,000.
    Is it that I understood incorrectly or was that an error?

    I’m confused kindly advise.

    Thank you

  2. Dear Sir,

    can you please tell me, in case that Gayle investment in Russell was 100%. Then in NCI calculation we wouldn’t need to deduct NCI share of asset investment (Gayle) in Russell?

    Many thanks in advance.

  3. I have a doubt
    in the video it is said that if the SS acqn is before the S acqn , that previous date can be ignored… effectively both date becomes same …
    so in W3 of SS we take fair value of consideration of SS as a % of parents share in Sub… so if the sub already controls the SS before the acqn by the parent… how will we treat the SS fv of consideration…??
    can anyone help…

  5. Dear sir,

    Thank you for such a great lecture.

    Can you please tell me what is the relation between Goodwill calculation and NCI calculation that your are mentioning both together and saying that 80% Bravo share is adjusted in Goodwill and 20% adjusted in NCI?

    I did not get the 20% and 80% adjustments ?? I can only get that 80% investment of Gayle in Russell belongs to Bravo.

    Thanks,

    • Hi Salman,

      I will try to explain the 20% adjustment as best as I can.

      In calculating the NCI of the subsidiary – Gayle, the NCI’s share of the fair value of the net assets of Gayle forms part of the items considered (in addition to NCI’s share of post acquisition profits, impairment and OCE).

      Remember that Net assets = Assets – Liabilities. Therefore, in calculating the NCI of Gayle using the NCI’s share of the fair value of the net assets, we are in effect talking about the NCI’s share of the fair value of the assets less liabilities of Gayle.

      Also remember that we want to calculate the NCI of just the subsidiary – Gayle alone and we don’t want to include anything that belongs to the sub-subsidiary – Russel because this has it owns NCI computation. Part of Gayle’s Assets (and probably liabilities) includes it’s investment in the sub-subsidiary Russel. Therefore, including the NCI’s share of the net assets of Gayle means we have also included the NCI’s share of Gayle’s investment in the sub-subsidiary – Russel. To eliminate this amount that has been included, we adjust for the NCI’s share of the cost of the investment in Russel (lets call this X) in the calculation of NCI of Gayle by subtracting this X figure from the total NCI in Gayle. By doing this, we have eliminated anything that has to do with the sub-subsidiary – Russell from the calculation of the NCI in Gayle.

      I hope this helps.

  6. Thank you very much for the lectures!

    Please help me with example 1. in the goodwill working , for fv of consideration of SS why do we take 80% as parents share and not the effective control of 56%?

  8. Hi

    I am a little bit confused with the percentage in workings 4 NCI. Gayle’s NCI share in Russell is 30% what is the rational for using 20% of NCI of S in SS when NCI of S in SS is 30%?. I don’t understand it. Unless you are using B’s NCI share of Russell.

    My understanding is that all the workings should be based on B’s share in the SS. Which also brings me to the Goodwill calculation. B’s share in Russell is 56% so I thought that the calculation of FV consideration will be 56% x 55000 and not 80% x 55000 and likewise B’s share of NCI investment in Russell.

    Can you please explain?

    Many thanks

  9. In working 3 why do we use 80% instead of 70% for the fv of consideration as Gayle only owns 70% of russel. Also, in working 4 why do we use 20% for NCI of S in SS? (the hard part).

    • I also don’t understand why we used 80% in working 3 instead of 70% considering that Gayle has 70% ownership in Russell. But in working 4, the reason why we are deducting 20% from Gayle’s NCI is because Bravo has 80% ownership in Gayle. Thus you can say that Gayle’s investment in Russell is owned 80% by Bravo. Now thinking about it I think that we used 80% in working 3. That will be because though Gayle paid 55million for 70% shareholding, 80% of that 55million technically belongs to Bravo. Correct me if I am wrong.

  10. Hey! Thanks a bunch for the lecture! I am however wondering the same thing Beraqui above is wondering! Why do we take all year worth of Russel’s profits if they have only been part of the group for 6months?

    • we didnt. the RE on acquisition date is already at the half year mark ie 1/7/2015, which is 20,000. RE on reporting date 31/12/2015 is 45,000, which leaves 25,000 for post acquistion from 1/7 to 31/12.

  11. Sir,
    In the video while working out the Net Assets of subsidiary Gayle,we have taken the share capital as 50,000 and Retained Earnings as 70,000 while in the question the retained earnings given are 75,000. Have i missed out anything or the calculation we did is wrong?
    Thank you sir.

  12. Acquisition date is always important in case we need to apportion any of the profits. In the end we did not need to apportion Russell’s results as we were given the retained earnings at the acquisition date in the question.

    It is usually more important in the group statement of profit or loss.

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