I am confused by the date Gayle purchased Russell, as it was part way through the year should we not be only taking half of the post acquisition growth in the W4 calculation for NCI?
You are correct in that there is a mid-year acquisition but we have been given the retained earnings figure at the date of acquisition and so the post-acquisition profits calculated in the net assets working will be those from the date of acquisition. There is therefore no requirement to pro-rate the post-acquisition profits as this has already been taken care of in the net assets working by using the retained earnings figure at the acquisition date.
It confuses me that when calculating the goodwill of the sub-subsidiary Russell that you take 80% x £55,000. I know you take the parents share but isn’t that the 56% effective controlling interest?
vickia says
I am confused by the date Gayle purchased Russell, as it was part way through the year should we not be only taking half of the post acquisition growth in the W4 calculation for NCI?
P2-D2 says
Hi,
You are correct in that there is a mid-year acquisition but we have been given the retained earnings figure at the date of acquisition and so the post-acquisition profits calculated in the net assets working will be those from the date of acquisition. There is therefore no requirement to pro-rate the post-acquisition profits as this has already been taken care of in the net assets working by using the retained earnings figure at the acquisition date.
Thanks
sarah2202 says
Hello,
It confuses me that when calculating the goodwill of the sub-subsidiary Russell that you take 80% x £55,000. I know you take the parents share but isn’t that the 56% effective controlling interest?
Kind regards
Sarah
P2-D2 says
Hi,
The parent owns 80% of the subsidiary and therefore the group owns 80% of the investment held by the subsidiary.
Try not to get it confused with the 56% effective ownership that the group has in the sub-subsidiary.
Thanks