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Hi mike,
Very confused. The value of the premium paid is calculated differently to how it is calculated in the answers to the lecture notes. 60445 as per the video and 39445 as per answers on notes.
Which is the correct method?
Hi, you’re right – I have changed the method this last month to bring it in line with the examiner’s article from two years ago. (Although I have to say that, in my humble opinion, the examiner’s article uses figures in his examples which are totally unrealistic – for instance, a fair valued 30% non-controlling interest investment given as a figure representing 60% of the fair valued assets)
Within the next week I shall be re-recording that particular chapter. Mt mistake – I should have asked Admin to postpone uploading it.
Sorry for the confusion
Hi mike,
Thank you for the reply. However, there is another confusion with this question.
W3b in the answers uses the post acq including the 84,000 so the 45% share is 153,000 and the adjustment to equitity is 39,445. When you put this figure into W3 this gives a retained earnings of 1,548,555 where as the answer gives 1,527,555 (addition error). But if you amend W3B and exclude the 84,000 from post acq, the 45% share is 115,200 and the adjustment to equity is 60,445. With this figure the substituted for 39,445 in W3 this then gives retained of 1,527,555 as per answer.
So which is the correct approach to calculate the post acq and therefore the adjustment to equity?
And you’re right again! When I posted that last reply, I was doing it from memory of the notes. But when I subsequently checked the notes, I see an awful mistake that I have made. The figure in the video is correct at 60,445. The notes are incorrect 馃檪
In fact, as I type this reply to your post, I have had to leave the task of re-writing a correct answer ready to send to Admin who will upload it into the notes.
So, if you’ll excuse me, I’ll get back to writing out a correct version for the notes and please accept my apologies for making the mistake in the first place. But well done to you for spotting it!
cost of 55%=900 why instead of 800?
Isn’t this the question where we are increasing from 55% to 80%? The investment value of 1,400 in the balance sheet comprises 500 from this additional acquisition and the cost of the original 55%. So that original investment must have cost 1,400 – 500 = 900
Ok?
Dear Mike. Many thanks for the invaluable lectures and support you provide through Opentuition. One question – what is the reasoning behind deducting goodwill from working 3b?
Because we’ve sold the subsidiary and therefore the asset of goodwill has also been sold.
Does that answer it?
I agree with the logic for deducting goodwill from working 3b, but I don’t understand why we’re deducting the goodwill in working 3a; at that point (i.e. when acquiring the 55%), the was no goodwill, wasn’t there?
I don’t believe that we are deducting the goodwill in W3A – W3A is simply a calculation of the parent company’s gain or loss on disposal and that’s worked out by looking at the sale proceeds compared with the carrying value disposed of. The parent has not recognised goodwill on the acquisition – the goodwill arising on acquisition features only in the consolidation.
Have I really deducted goodwill in W3A? I can’t believe it!
馃檪 Thank you for your feedback and all the study materials!
Yes, it does Mike. Thank you very much for your help.
Hmm, not really. Try reading it again and I think there’s also a video lecture on this chapter – see if you understand it better after going through it again. If you’re still struggling, identify a particular area which is causing difficulty and post again
Mike I am struggling with this chapter..,I found it too complicated.
Is there any best way to understand this??