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Hi Sir,
I hope this email finds you in pink of health and good spirit.
Sir, I am confusing with the calculation for the step disposal of subsidiary with control retained. I have read through the SBR study materials, I not sure why some time the adjustment was calculated based on the net assets (example 3, pg 29) and some time only post-acquisition profit adjusted out (example 5, pg 30).
Furthermore, in ACCA study materials and ACCA’s past year papers P2 in June 2014 sitting, goodwill also adjusted out based on the rate of disposal?
There is much inconsistency over this type of step disposal – marks given for anything reasonable.
My recommendation
Proportionate goodwill – use % NA
Full goodwill – use % based on % current CA of NCIIn June 2014 the rules for this (and everything else) were totally different, as was the style of the exam
Make sure you are using a recent exam kit not past papers.
Hi Sir,
Thanks for your kind advice.
If the voting right affected (control still retained) by the issued of new shares in subsidiary, what is the solution here?
For example:-
A bought 60.78% of C’s share when C’s net assets were 124,183.20 (make up with Share Capital – 1.3mil and Accumulated Losses – (1.1mil), few years back. During the year, C issued 1.2mil new shares, this have caused voting right in A decrease from 60.78% to 60.40% (decreased 0.38%) when the Accumulated Losses – (1.2mil).Sir, from my understanding, the decrease of 0.38% have to share to NCI right? What amount should I use as NA to calculate the situation? Solution 1 or Solution 2 is correct?
Solution 1
NA = SC + RE
NA = 1.3mil + (1.2mil)
NA = 0.1milShare to NCI,
0.1mil x 0.38% = 0.00038 milDr SOCIE 0.00038mil
Cr NCI 0.00038milSolution 2
NA = SC + RE
NA = 2.5mil + (1.2mil)
NA = 1.3milShare to NCI,
1.3mil x 0.38% = 0.00494 milDr SOCIE 0.00494mil
Cr NCI 0.00494milI’m completely at sea with your figures. Which exam question is it please? Examiner never uses figures like this.
Hi Sir,
I’m sorry for confusing you. This is real life example.
I just wanna to confirm with you, if a company shareholding right changed due to new share issued in subsidiary.Let’s say decreased from 80% to 70%, due to 1.2mil new shares issued. How should I calculate the 10% deemed disposal to NCI? I have to increase the 1.2mil new shares?
NCI would increase – other side to SOCIE – is what I would try in the exam – never seen it tested.
If you are dealing with a real company you should seek specialist advice.
Neither OT nor Stephen Widberg accept any liability if this advice is being used in a real company situation.
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