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- November 13, 2018 at 5:07 am #484652
In BPP Mock Exam 3 Question (1)(a), for step disposal, calculation of increase in NCI is use subsidiary’s fair value of the net asset at the date of sale multiplied with the shareholding transfer to NCI.
If I do it using the method in BPP workbook pg 300, It will be :
NCI at acquisition 54
NCI share of post acquisition 15
(260-160)x30%
NCI at date of disposal 69
Increase in NCI (69*10/30) 23Why are these 2 method provide different answer and which method should be used?
Thank you.
November 14, 2018 at 8:30 pm #484858Hi,
You can use either method, so do not worry as long as you have the principles correct.
Thanks
November 15, 2018 at 5:16 pm #484934Hi, thank you for clearing my doubts.
Here is an example, not sure whether I do it correctly..
On 1 December 20X0, Trail acquired 80% of the Dial’s 600 million $1 shares for a cash consideration of $800 million. At acquisition, the fair value of the non-controlling interest in Dial was $190 million. Trial wishes to measure the non-controlling interest at fair value at the date of acquisition. On 1 December 20X0, the retained earnings of Dial were $300 million and other components of equity were $10million. The fair value of Dial’s net assets was equivalent to their book value.
On 30 November 20X1, Trail sold a 5% shareholding in Dial for $60 million. At 30 November 20X1, Dial had retained earning of $450million and other components of equity of $30million.Calculate the following figures in relation to Dial for inclusion in the consolidated of statement of financial position of the Trail group as at 30 November 20X1.
(a) increase in controlling interest
(b) adjustment in equity(a)
first method:
NCI at acquisition 190
NCI share of post-acquisition RE to disposal 30
(450-300)x20%
NCI share of post-acquisition OCE to disposal 4
(30-10)x20%
NCI at date of disposal 224
Increase in NCI (224×5%/20%) 56
NCI at the year end 280
Therefore, the increase in NCI is 56.Second method:
Net assets of Bochem at the date of sale:
Net asset at 30 November 20X1-1080
(600+450+30)
Goodwill (800+190-600-320)-70
Total net asset – 1150
The NCI will be allocated a 5% share of the net asset, which is 57.5 (1150×5%)
Therefore, the increase in NCI is 57.5Are both answer correct?
Thank you.November 16, 2018 at 5:32 pm #485009I think for your second method we should have :
Purchase consideration = 800
Fv of NCI at disposal = 224less: Net Assets @ disposal = (1080)
Goodwill @ acq. = 56
then:
Net Assets @ 30 Nov 20X1 = 1080
Goodwill @ disposal = 56
Total Net Assets = 1136Increase in NCI 5% X 1136 = 56.8
not sure as well but your first method is correct
November 20, 2018 at 5:38 pm #485344@wyy:
in calculating the goodwill, where is the number 320 come from?
did you mean RE + OCE?
then it should be 300+10 = 310
so Goodwill should be 80.
still 5% of whole ownership(1080+80=1160) is 58.
“still inconsistent 🙁 ”November 22, 2018 at 5:16 pm #485524Yes, I mean RE plus OCE.
I made a mistake thereSeptember 8, 2020 at 9:51 am #584028Could you please clarify which method produces correct answer ?
September 8, 2020 at 5:54 pm #584178I am closing this thread as I am not sure what is being asked.
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