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  3. Awesome lecture.
    I am trying to understand the reason why 6000 and not nil is being used in calculating consolidated retained earnings

    When calculating for the fair value of the subsidiary’s net asset retained earnings is nil

  4. Hello,
    please could you advise me what example you are working on at the beginning of this lecture? which page number is it (in the new lecture notes)?
    It is very hard to follow any of these lectures as it seems all the page numbers you reference to do not match up to the lecture notes!
    Thanks

      • Remigijus acquires 75% of the issued share capital of Ilona for $80,000 when the Ilona retained earnings were $60,000. It is the policy of
        the directors to value the non-controlling interest as their proportional share of the subsidiary fair valued net assets at date of acquisition.
        Two years later on 31 March, 2010 the respective Statements of Financial Position were:
        Remigijus Ilona
        $ $
        Investment in Ilona 80,000 –
        Other assets 100,000 150,000
        180,000 150,000
        $1 Equity shares 50,000 32,000
        Retained earnings 90,000 98,000
        140,000 130,000
        Liabilities 40,000 20,000
        180,000 150,000
        Prepare the Consolidated Statement of Financial Position of the Remigijus Group as at 31 March, 2010.
        NB. Goodwill has not been impaired since acquisition.

  6. Hi Mike

    Thanks for the awesome lectures.

    Not sure if I missed this bit: How do we treat the Value of the NCI (in W2) when the examiner says provides the value of the goodwill attributable to the NCI)?

    My guess would be to value it at its proportional share and then add the goodwill portion given to the goodwill calculated. Will that be correct?

    Thanks.

  7. Hi Mike

    Was just wondering – when calculating the ‘Fair Value of NCI at date of acquisition’ using the last method (i.e. the $3.20 per share example), do we ignore the pre-acquisition retained earnings figure altogether? Are the pre-acq RE accounted for already by the value per share?

    To put it another way, would it always be wrong to do the following?

    $3.20 per share x 8000 shares = $25,600
    NCI’s share of pre-acq retained earnings = 25% x 60,000 = $15,000

    TOTAL (FV of NCI at DOA) = $40,600

    • “would it always be wrong to do the following?” – yes, it would always be wrong!

      If the value of a share is given in the question (or in real life) that value reflects the worth of that share in the value of the company taking into account accumulated reserves (as well as sentiment)

      The value of a share is its face value PLUS the share of accumulated reserves (plus the above mentioned sentiment)

      OK?

  8. Hello mike, Thank you very much for all the assistance, I am really confident with what I get here. My problem at the moment is that I downloaded the notes but first my pages do not correspond to your pages and from example 6 it is totally different from what you are saying, so I want to ask if there are other notes. please help me as I cant follow

  12. Thanks a lot for the good work you are doing. Please I need a little explanation. Why don’t we share impairments of goodwill according to the percentage of goodwill owned by both NIC and controlling interest but rather do it according the ownership of the subsidiary. For instance in a 60%/40% ownership we are told the goodwill of the NCI is 2000 and after calculating goodwill you have 35000 as goodwill which is supposed to be impaired by 10%. Why not calculate impairment attributable to the NIC as 10% of 2000 since that is what they owned as goodwill and 10% of 33000 as impairment attributable to holding company but rather we take 40% and 60% of the total impairment?

    Anyone with an explanation could help me.

    • Good question! It’s something I talk about in lectures. And quite honestly, I don’t know. There is an inherent feature of the rule in that it is open to major abuse – the directors assess goodwill attributable to the 40% nci as just $100 where total nci is $50,000. Now impair by $10,000

      Nci share is $4,000 and parent share is just $6,000

      Yet “fairly”, the allocation would be $20 / $9,880

      Hmmmm! Good question

      The reason why we allocate on a share holding basis? Because that’s what IFRS 3 revised says that we must do

      OK?

  13. Hi I have a question with regards to goodwill : according to the revised IFRS .will it be be correct to calculate goodwill for both CI and NCI and add the two (less impairment ) in the consolidated statement of financial position ? As goodwill under non – current asset?
    Or am only supposed to include the CI good will?

    • Please post questions like this on the Ask the Tutor forum in future. Thanks 馃檪

      In CSofFP the goodwill value is shown as in working W2 according to MY method of setting out workings (BPP and Kaplan do their workings differently than I)

      So the goodwill as calculated in W2 is the figure that features and therefore includes any goodwill attributable to the nci

      Hope that helps

    • Goodwill is not impaired at a certain percentage each year – that would be amortisation and we left that as a principle some time ago.

      Instead of amortising, directors are nowadays required to consider whether goodwill should be impaired this year and, if so, by how much

      So your question isn’t valid and I cannot answer it!

    • It’s the value of the nci at date of acquisition. Sometimes the examiner will tell you the value. Sometimes he says it’s proportionate, sometimes he’ll tell you the value of the goodwill attributable to the nci and sometimes he’ll say that the subsidiary share value is a fair value for the purposes of calculating the nci value of their investment

      Ok?

      • sorry for disturbing you big mike,but what do you do when its proportional? do you multiple the sum of the subsidiaries equity share and retained earnings by the holding companies acquired percentage?? Thanks so much

      • Michael my problem seem to be with the example 5 in chapter 7.i can’t see how to get 23,000 for that calculation please help me out.thanks for the immediate reply

      • Oooh big mike i just got it.i just had to add the 60,000 to the 32000 and multiple by the subsidiary’s percentage.so easy. sorry for bothering you.

        Thank you

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