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Changes in group structure – examples – ACCA SBR lectures

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  1. Hello, thank you for the lectures and all materials, they are very helpful.

    I wanted to ask about one thing – you recommend to read ACCA article Business combinations – IFRS 3 (revised)

    There is an example 5 about step disposal when no control is lost and we should record the increase in NCI.

    EXAMPLE 5
    Disposal of part of holding to NCI
    Using Example 4, instead of acquiring a further 10%, Rage disposes of a 10% interest to the NCIs in Pin on 31 December 2008 for a cash consideration of $65m. The carrying amount of the net assets of Pin is $535m at 31 December 2008.

    In the solution given (in the article) to calculate the decrease of NCI the goodwill of 90 is considered, which surprised me a lot.
    Transfer to NCI (10% x (535 net assets + 90 goodwill)) (62.5)

    The increase to NCI, which I calculated, was 75.5 (being the NCI at acquistion 210 + NCI share of post acq reserves 16.5 and the ratio %sold to NCI before disposal 10%/30%).
    Can you explain why goodwill was included to calculate decrease of NCI in example 5, and not included it in example 4 to calculate the increase of NCI?

  2. Hi Sir,
    Thank for your lecture. I have tried to consolidate the Financial Posotion statement of the 3 companies @31 Dec 20X5, but it is still unbalance. I think there is something wrong with my working on the NCI on the consolidated FS. I hop you can help.
    Asset:
    Non-current asset = 180 + 115 + 100 = 395
    Goodwill = 10 + 23 = 33 (working previously from the lecture)
    Current asset = 80 + 90 + 60 = 150
    Total asset = 395 + 33 + 150 = 578

    Liability and equity:
    Non-current asset = 15 + 14 + 10 = 39
    Current asset = 50 + 46 + 30 = 126
    Share capital = 250
    Retained earning = 110 (parent full retained earning) + 24 + 9 (subsidiary post retained earning) – 1 + 7 (effect of 31 Dec 2015 transaction) = 149
    Non-controlling interest = 40 + 13 (NCI @ acquisition date) + 16 + 1 (NCI post acquisition RE) -14 + 28 (effect of 31 Dec 2015 transaction) = 84
    Total Liability and equity = 39 + 126 + 250 +149 + 84 = 684

    There are 70 mil unbalance, I can not spot the mistake.

  4. Teacher,
    I think in Example 5, we should calculation ‘Carry value of 20% JONES’ shares disposal’ according to ‘Carry value of Net assets of JONES at 31/12/15 plus Goodwill of JONES at 1/1/15’ instead of use NCI (=14)*20/10.
    Check with ‘Example 5 technical articles acca IFRS 10’ and with ‘exmple 3 opentution note’

    My opinion for JONES’ shares transactions is:

    Carry amount of net assets of JONES at date of change equity (31/12/2015):
    = FV of net asset of JONES at acq-date (1/1/15) + Change JONES equity post acq-date (from 1/1/15-31/12/15)
    = (75+35) + (45-35) = 120
    (Assumption that net book value of net assets at acq-date = FV of net asset at acq-date)

    GW at acq-date (1/1/15) = 23 (for calculated above)

    Therefore Carry amount of 20% share disposal = (120+23)*20% =28.6
    So double entry:
    DR: Cash 35
    CR: NCI 28.6
    CR: RE 6.4

    • I think, In example 3 in the open tuition notes, the only way we could find the NCI is if we used the proportionate method. However, in this example 5, they require the Fair Value of the net assets

    • OCE include share premium, revaluation reserve, gains/losses on fair value through other comprehensive income investments.

      Part 1 of the question involved a gain on disposal when cAlculate the goodwill, since part two is related to part 1, this might be the reason for debiting OCE instead of Retained earning?

  9. Hi Chris,

    thanks for the video lectures !

    I was wondering what exactly is the component in OCE thats reducing due to the transfer ? If its not the goodwill impairments and there are no revaluation gains or loss calculated then what is reducing within the OCE, what does that balancing figure of 1.1m represent ?

    Thanks.

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