Group SPL - Group profit on disposal - ACCA Financial Reporting (FR)
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5 Comments
M
Mai·
Hi Sir. I have a question.
This is a question from BPP.
On 1 January 20x8, Lentil Co acquired all of Chickpea Co's 100,000 $1 shares for
$400,000. The goodwill acquired in the business combination was $60,000, of which 40% had been written off as impaired by 31 December 20X8. On 31 December 20X5 Lentil Co sold all of Chickpea Co's shares for $680,000 when Chickpea Co had retained earnings of $215,000.
My solution is
Proceed 680,000
Non control interest 0
Net asset at disposal (100,000+215,000)
Goodwill (36,000)
= 329,000
But the answer in BPP is 280,000(680,000-400,000)
Could you please help me?
Thank you!!
L
Lisa·
[Sept 24 - June 25 - Edition Q276] The requirement of the question was, what amount should be included in the individual entity financial statements of Lentil Co?
Individual Statements, we don't use the Group proforma:
Use instead the one the tutor started with at the start of the video:
Proceeds - (less) Investment.
Value of investment is $400'000, and Proceeds are $680'000.
$680'000 - $400'000 = $280'000.
I feel bad because this is ACCA at its core - confusion and therefore don't forget rule number 1: READ the question!! Best of luck friend!
A
Aasif·
Thank you.
Just for understanding, we have added NCI share before deducting 100% sale proceeds from N.A and Goodwill to arrive at Group Profit or Loss. Doesnt this profit or loss further get distributed between Group and NCI?
L
Lisa·
No, we consolidate if we have control (ie, we own shares in the subsidiary); the rule is the parent company MUST consolidate. If we've disposed of them and have a disposal date, and a figure for proceeds, then we no longer have to consolidate anything. Obviously, if you're working out the proforma for P/L on Disposal, the parent no longer has control. Therefore, no allocation, etc.
L
Lisa·
Also, we don't deduct proceeds from Net Assets + Goodwill, its the other way around.
This is a question from BPP.
On 1 January 20x8, Lentil Co acquired all of Chickpea Co's 100,000 $1 shares for
$400,000. The goodwill acquired in the business combination was $60,000, of which 40% had been written off as impaired by 31 December 20X8. On 31 December 20X5 Lentil Co sold all of Chickpea Co's shares for $680,000 when Chickpea Co had retained earnings of $215,000.
My solution is
Proceed 680,000
Non control interest 0
Net asset at disposal (100,000+215,000)
Goodwill (36,000)
= 329,000
But the answer in BPP is 280,000(680,000-400,000)
Could you please help me?
Thank you!!
Individual Statements, we don't use the Group proforma:
Use instead the one the tutor started with at the start of the video:
Proceeds - (less) Investment.
Value of investment is $400'000, and Proceeds are $680'000.
$680'000 - $400'000 = $280'000.
I feel bad because this is ACCA at its core - confusion and therefore don't forget rule number 1: READ the question!! Best of luck friend!
Just for understanding, we have added NCI share before deducting 100% sale proceeds from N.A and Goodwill to arrive at Group Profit or Loss. Doesnt this profit or loss further get distributed between Group and NCI?
It's Proceeds + NCI - (Net Assets at Disposal + Goodwill)!!!
This "Profit or Loss on Disposal" is added to the face of the SoP/L under Discontinued Operations, like tutor said.