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SBR

Basic group structures - SFP workings and adjustments - ACCA (SBR) lectures

VIVA Subject Guide
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22 Comments

  1. Tolu
    Could you please clarify why the NCI at acquisition is added to the FV of consideration (as against adding it to what is being acquired) as though the investor is the one bringing the NCI as part of the purchase consideration?
  2. Pooja
    My understanding says, NCI is added, because you are deducting the net assets value of 100% of subsidiary. When you purchase a subsidiary you buy 50% or more , through consideration. the other 50% is NCI = total 100% of Subsidiary cost (consideration) less FV of Net Assets, will provide goodwill for the entire subsidiary. I hope I am able to explain properly.
  3. AadhithytaSupporter
    did u clear pooja
  4. strx
    Goodwill is the value of a company (market valuation) in excess of the company's net assets.
    i.e. Goodwill = Value of company - Net assets

    Remember NCI is what the acquirer did not buy. So for example, if acquirer buys 51% of the company, we assume:
    Value of company (100%) = FV of consideration (51%) + NCI at acquisition (49% balancing figure)

    Therefore:
    Goodwill = (FV of consideration + NCI at acquisition) - Net Assets
    ^ which is basically the proforma


    Related topic if you like to overlearn is 'business valuation' (recall from FR: net book value if the company is about to liquidate, market capitalization, etc.).

    https://www.investopedia.com/terms/b/business-valuation.asp
  5. Christopher
    How come we deduct all of the impairment in the associate for the Group Retained Earnings and Investment in Associate Calculations, instead of just the parent's % ownership like we do with a subsidiary?
  6. prka89
    3:12 impairment goodwill every day? - i suppose it should be once a year
  7. Jeby
    Impairment test on goodwill have to be done every year. (IAS-36)
  8. strx
    Or when there is an indication of impairment (also IAS 36).
  9. penelope
    Hi - who is the NCI?
  10. Alex Lim
    hi sir, may I know what does that means non-cotermious YE? I not really understand about this part.
  11. patkev
    Non-conterminous year end from my understanding means both parent and subsidiary have different year ends, meaning they are not consistent
  12. Olabisi
    Pls what does PUP mean or represent?
  13. MikeLittleTutor
    Provision for Unrealised Profit
  14. Olabisi
    Thank you
  15. wisecrack
    Profit on unrealised profit
  16. wisecrack
    Sorry provision for unrealised profit
  17. Zura
    The explanations and illustrations is great, thank you tutor.
  18. misbahkiran
    fantastic lecture...you are an amazing teacher..
  19. kemkemm
    Based on PUP, if associate sells to parent, why do we debit w5 when parent and associate aren't consolidated? If associate is selling to parent, the profit sits with the associate isn't it? And if that's the case then the parents retained figures aren't affected.

    Is this right?

    Thanks for your help.
    Sarah
  20. P2-D2Tutor
    Hi,

    It is a bit odd but regardless of the direction of the transaction, the entry is to debit the share of profit of associate (SPL) and credit the investment in associate (SFP) with the investor's share of the profit.

    Thanks
  21. laylluli
    hi sir, i am a little bit confused about that at the end of lecture, referring to adjust unrealised profits P to A, why need to Cr. Investment in A?
  22. P2-D2Tutor
    Hi,

    We would normally take the entry to the inventory but as the inventory is in A's books we cannot take it there as A's inventory is not included within the group accounts. We therefore have to take the entry to the only element of the associate that is included within the group accounts, and that is the investment in associate.

    Thanks

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