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Group SCF – Dividend received from Associate – ACCA (SBR) lectures

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  2. Hi Chris, Thank you for the lecture.
    I have a question (stupid question though). Here it goes.

    1) NCI T Account:- Dividend is paid to NCI (money going out). Why it is on DR side of T Account.

    2) Associate T Account:- Dividend is received (money coming in). Why is the entry on CR side of T Accout.

    Thank you so much
    A

    • Hello!
      1)Money going out decreases our liability to the NCI , therefore it has been put on the DR. Side. Remember we are making the account for NCI which appear on the liability side of SFP and as such a Credit to the account will increase liability and a corresponding Dr will decrease it.

      2) Again an associate appears on the Assets side of the SFP and as such a Dr. To the account decreases the asset and Cr. Increases it. We have recieved the money due to us. Therefore our asset is decreased by the amount received.

      Tell me if you need more help.

      • I disagree with what you said regarding dividend paid to NCI. The reason for debiting the NCI is because dividend is return on NCI’s investment. Since the Sub has declared PFY which is attributable to NCI, any dividend paid to them should go to the opposite side of the PFY for NCI. It is up to you how you want to memorise this but NCI is not sitting on the liability section of the group SFP, and it is certainly not “owed” by the Parent company.

  3. Hi Sir,
    In changes to group structure, acquisition of subsidiary reduces NCI right? ie..Parent share is increasing from 50%-20%, so NCI falls. But here u mentioned that wen there is an acquisition of Sub, NCI increases. Could you please clarify on this?.

    Thank you

    • Hi,

      They are two different scenarios. In this scenario we are going from no subsidiary to then acquiring one, so we are increasing the amount of the NCI as we are adding to what we currently already have.

      In the changes in group structure scenario we already own a subsidiary, and by acquiring more shares in it we have a higher percentage ownership and therefore a lower NCI.

      Thanks

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