Great lectures overall really. Kudos ! BUT this is just SOOOOOOO frustrating, not even mention why we use different method for disposal. If we have the value of 10% of NCI (14 – the given 13 plus their share of post acq) and we want to know the value of 20 % shouldn’t we just double it to 28. You are getting close to 28, but is that a fluke? Urgh.

Again, great lectures

PS the way I try to work that part out is simple proportions

“Why do we calculated the NCI differently? Ie if we are looking to purchase more of Hulme we take 10/40 *NCI but when we decrease ownership like with jones we take 20% of the NA+gw”

“Why do we calculated the additional or decrease in NCI differently? Ie if we are looking to purchase more of Hulme we take 10/40 *NCI but when we decrease ownership like with jones we take 20% of the NA+gw”

simply because when you sell you need to work out what you selling i.e. percentage of NA + GW and when you buy you need work out the percentage of NCI.

Why do we calculated the additional or decrease in NCI differently? Ie if we are looking to purchase more of Hulme we take 10/40 *NCI but when we decrease ownership like with jones we take 20% of the NA+gw

Actually, that’s still inconsistent. For Hulme’s case, you’re assuming NCI/40% is (NA + GW). But for Jone’s case, if you take NCI/10% you won’t get (NA + GW). The NCI in respect of Jones is 14, which represents 10% of the sub’s worth. And as we see from the example, the (NA + GW) in respect of Jones is 143. Now NCI/10% = 14/10% = 140. Obviously that doesn’t result in 143. So how is that consistent?

My take is that the basis depends on where you’re transferring the worth from and to. If you’re transferring from the NCI, the basis will be on the NCI; if you’re transferring to the NCI (from the net assets), the basis will be on the sub’s carrying amount (i.e. its total worth, being FV of net assets + GW). As for the reason, Chris has said in the last video that in the second case, we’re not transferring more of the already owned NCI to the current NCI, but the assets, liabilities and goodwill, therefore we’re basing the % not on the NCI, but the assets, liabilities and goodwill (by assuming that the sum represents 100%). However, mathematically the percentages don’t line up perfectly, which is what I can’t explain. I wonder if that’s explanable.

bballhawk says

Great lectures overall really. Kudos !

BUT this is just SOOOOOOO frustrating, not even mention why we use different method for disposal. If we have the value of 10% of NCI (14 – the given 13 plus their share of post acq) and we want to know the value of 20 % shouldn’t we just double it to 28. You are getting close to 28, but is that a fluke? Urgh.

Again, great lectures

PS the way I try to work that part out is simple proportions

sachini1995 says

Hi Chris,

Thank you for the great lecture. But why do we use two different methods to calculate the change in ownership for Jone and Hulme?

confideans says

I have the same question as below

“Why do we calculated the NCI differently?

Ie if we are looking to purchase more of Hulme we take 10/40 *NCI but when we decrease ownership like with jones we take 20% of the NA+gw”

meowmom says

Same question…

haydn says

Hi Chris,

Thanks for the great lectures, in the answers at the back it says Group Retained Earnings is £135.6, it should be £148.4.

P2-D2 says

Thanks for pointing it out. I’ll try to make sure I get the next set of notes updated.

Chris

okssana says

thanks for the great lecture

aren’t we missing 100% of parent OCE in the final part of the calculation? (+10 to the total)

funkyou says

I have the same question as rachelmin:

“Why do we calculated the additional or decrease in NCI differently?

Ie if we are looking to purchase more of Hulme we take 10/40 *NCI but when we decrease ownership like with jones we take 20% of the NA+gw”

haider says

simply because when you sell you need to work out what you selling i.e. percentage of NA + GW and when you buy you need work out the percentage of NCI.

confideans says

is it correct?

rachelmin says

Why do we calculated the additional or decrease in NCI differently? Ie if we are looking to purchase more of Hulme we take 10/40 *NCI but when we decrease ownership like with jones we take 20% of the NA+gw

kelvincck says

they are in fact consistent. the key bit here is the base factor these numbers are on.

NCI is base on its 40% ownership. so dividing NCI by 40% is the whole ownership.

Whole ownership is (NA+gw)by definition.

so NCI/40%=(NA+gw)

so 10/40 *NCI = 10% / 40% *NCI = 10% *(NCI/40%) = 10% (NA+gw)

same layout as the Jones’ formula.

quintusking says

Actually, that’s still inconsistent. For Hulme’s case, you’re assuming NCI/40% is (NA + GW). But for Jone’s case, if you take NCI/10% you won’t get (NA + GW). The NCI in respect of Jones is 14, which represents 10% of the sub’s worth. And as we see from the example, the (NA + GW) in respect of Jones is 143. Now NCI/10% = 14/10% = 140. Obviously that doesn’t result in 143. So how is that consistent?

My take is that the basis depends on where you’re transferring the worth from and to. If you’re transferring from the NCI, the basis will be on the NCI; if you’re transferring to the NCI (from the net assets), the basis will be on the sub’s carrying amount (i.e. its total worth, being FV of net assets + GW). As for the reason, Chris has said in the last video that in the second case, we’re not transferring more of the already owned NCI to the current NCI, but the assets, liabilities and goodwill, therefore we’re basing the % not on the NCI, but the assets, liabilities and goodwill (by assuming that the sum represents 100%). However, mathematically the percentages don’t line up perfectly, which is what I can’t explain. I wonder if that’s explanable.

ramosquagmire2 says

why is the retained earnings for the subs calculated using net assets rather than retained earnings on the BS ?

mokgoats says

Hi

on SBR example 5 on Change in Group Structure

This is my workings

Working No 5: Group Retained Earnings

100 % P 110

+ w2 70% x 40 28

+w2 70% x 10 7

and then have

Working No ^: Other Component of Equity

100% P 10

-w4 -1

+w4 6.4

why are we using the old percentages on GRE and adding the figures that affect OCE on GRE

bondwise says

Yep, thought the same. I think he just clubbed all the ‘Reserves’ in one so it’s really the Group RE+OCE working.

glennishere says

Confused.

Retained earnings=Retained Earning+OCE in the exam?