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Sir u asked me to go through the video lectures of consolidated statement of financial position, I hv a question to ask; are there 2 types of fair value? This is because I have seen FV of NCI, and then FV of NCA -which is non current asset.
Chapter 23b on consolidated statement of financial position goes thus: P acquired 60% of the shares in s on 1 Jan 20×7 when the retained earnings stood at$6000. The FV of the NCI at the date of acquisition was $30000 on Dec 31st 2010. The NCA was P 50000 and Sunday 30000. When u solved this u added 50000+30000 =80000. Why didn’t u add the FV of NCI? Is it because it’s not FV of NCA ? But then when u were solving Goodwill, u used Fv of Nci to solve it as i have seen u use FV of NCI or FV of NCA to solve goodwill in other questions. Please explain why this is, so that I can be able to differentiate this in the examYes – there are two fair values.
The fair value of the NCI at the date of acquisition is relevant for calculating the goodwill arising on acquisition.
The fair value of the non-current assets is something completely separate and is relevant for calculating the goodwill arising on acquisition and for calculated the value of the non-current assets of the group.In this question there was no mention of a fair value of non-current assets, and therefore the total NCA’s in the consolidated SOFP is simply the total of the NCA’s in the two companies. It would only be different if we were told that the fair value of the NCA’s in S was different from that in their own SOFP.
When calculating the goodwill, it is only the fair value of the NCI that is relevant – there is no mention of a fair value adjustment being needed for the NCA’s.
I explain how we deal with mention of a fair value of NCAs’ in the previous chapter of the lecture notes and the lectures that go with it.
Questions in the exam will always make it clear whether they are referring to a fair value of the NIC or referring to a fair value of the NCA’s.
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