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  1. In the notes after example 3 you show the goodwill of the NCI as 19,600 which I understand the workings but can you please explain why the goodwill of the NCI comes out more than 40% of the goodwill (44,000 x 40%=17,600) also the Fair value of the NCI (30,000) is higher than it’s percentage stake (70,000 x 40%=28,000).

    Is it just the example or is there a reason it comes out like this.

    Thank you for all the lectures, they are very well explained and easy to understand.

    • The fair value of the NCI at the date of acquisition can be anything. If you were not given a value (which you would be in F3) then you would assume it had the same value per share as what the holding company paid for their shares. Since the holding company paid $40,000 for 60% of the shares, the value of the shares held by the subsidiary would then be valued at 40/60 x $40,000 = $26,667. However, the question says that $30,000 was the fair value at the date of acquisition. (Usually, in fact the fair value would have been less than 26,667 because a smaller holding is likely to be worth less per share than a large holding).

      It is for the same reason that the goodwill for the NCI is more than 40% (but you would never be expected to do that ‘check’ in the exam – it would be wasting time 馃檪 )

  3. Thank you, thank you ,thank you for these notes and lectures. Did I say thank you?

    In the video above you obtain the NCI by adding their share of retained earnings 4000 to the minority original vair value 30000 for a total of 34000. Perfectly logical so far.

    Then you find the NCI interest in a different way, which line by line works perfectly and final result is somehow the same EXCEPT this line makes no sense to me

    “Retained earnings (40% x 16,000) 6,400”

    There must be a reason for taking 40 percent of 16000 and not 40 % of the post acquisition 10000 profit, but for the life of me I don’t see it.

    In the video the same share is 4000, which understandable, but in the notes their share is 6400

    Can you pleeeeeeeease explain ?

      • Those workings were only done as a check – they are not needed for the exam and if they confuse you then ignore them.
        The minority are entitled to their share of all the retained earnings, it is just that the fair value at the date of acquisition will already include their share of pre-acquisition earnings.

      • I see. I just did the quiz and I am getting all the answers ( being a multiple choice helps if I add figures wrong). I am still a little fuzzy on the partial ownership logic. On consolidated we subtract our investment and we add the goodwill and that somehow equals the partial profits plus the NCI minus original share capital. As I said, it does work based on your formulas, but I am not sure why … I will do more examples in the revision pack.

        Cannot thank you enough.

  4. Dear sir, in example 1. Non controlling interest show, 20 % of $10000 for share capital of S ,And 20 % of $8000 for retain earnings of S, But in example 2 , For non controlling interest Why you only show 40 % of retain earnings of S, Why not Share capital also ?

    • But this is example 2 and P did not acquire the shares on the date of incorporation! The question says that the retained earning on the date of acquisition were $6,000.
      I assume that you have downloaded the free lecture notes?!

    • You can only mean P owns 50% of S’s shares and S owns 50% of P’s shares (otherwise your question makes no sense).

      Two things, we only consolidate if one company controls the other – it is not only shareholdings (as is explained in the lecture and in the notes), but for shareholdings it is when they own more than 50% (not exactly 50%).

      Secondly, when there are ‘cross-holdings’ or holdings in companies that control other companies, then this is not in the syllabus for F3 – it is later exams.

  8. Hey Sir,

    Can a question like example 6 come in exam but can it be included from what dealt with in all of the lectures, like can it be together with it where have to find goodwill etc and also receivables and payables to add to our console. bal. sheet?

  10. Hello Sir,I know this is not very relevant,but which computer software are you using to deliver the content? I can see it allows for writing with different colours and even has an eraser. I would be so grateful…Regards…

  11. P acquired 400,000 ordinary $1 shares in S on I January 20X5 for $850,000. At that date the share capital of S was 500,000 $1 ordinary shares and accumulated profits of $400,000. The net assets of S at 1 January 20X5 were generally at fair value with the exception of a property which had a fair value of $100,000 in excess of its book value. The fair value of the non-controlling interests at the date of acquisition by P is $200,000. The company estimates the life of goodwill to be 10 years.
    What is the amount of goodwill attributable to the equity owners of P that should appear in the consolidated statement of financial position as at 31 December 20X7?
    A $40,000
    B $50,000
    C $130,000
    D $110,000

    Help please

    • The balance sheet value of the net assets at the date of acquisition is equal to the total capital plus reserves at the date of acquisition – 500,000 + 400,000 = 900,000. However, property has a fair value of 100,000 more, so the total value of the assets is 1,000,000.

      The total value placed on the business at the date of acquisition is the amount P paid for their share (850,000) plus the value of the non-controlling interest at that date(200,000). So a total of 1,050,000.

      The goodwill is the difference – 1,050,000 – 1,000,000 = 50,000.

      The fact that the question says that it has an estimated life of 10 years implies that the 50,000 is amortised (depreciated) by 5,000 a year. If this were the case, then there would be 3 years depreciation which would give 35,000 (which is not an answer!!!)
      In fact, these days we do not depreciate the goodwill – it should be revalued each year and reduced if its value has fallen. That is outside of F3, and so for F3 you would leave the value at 50,000.

      (I don’t know where you got the question from, but these days the examiner will not (should not) confuse you by giving any mention of an estimated life of goodwill)

      • Thank you for replying. I did get 50000 but was not sure of the depreciation part. As you mentioned in earlier lectures that depreciation is not part of the f3 so I was shock to see it there. I got this question for 2013 Emile Woolf revision kit.

        Thanks again for you help.

  13. As mentioned, Goodwill is $44,000 considering to Non-Controlling Interest (the other 40% of the S). I have a question, whether Goodwill will reflect in the Balance Sheet of the other company whih is holding 40%. Or will the goodwill only reflect in the Balance sheet which is holding more than 50% of share of S.

    • @atherakhlaq, Goodwill must be shown in the Consolidated statement of Financial position not in the others. And there have been said that the Parent is made the consolidated statement, therefore the Non controlling interests are not making the consolidated statement and not showing the Goodwill.

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