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If a parent acquires further shares within the control limit before the year end.. say 55% to a further 65%.. we do not recalculate goodwill but how do we deal with the post acquisition profits?
Do we time apportion our share and increase it by a further 10% and the same for NCI.. I mean reduce theirs from 45% to 35%? Please advise
Hi,
If we increase out ownership from 55% to 65% then you are correct in stating that we do not recalculate goodwill as this is calculated on the initial acquisition of the subsidiary when we gained control for the first time.
To deal with the change then there is a change in ownership adjustment made using the following entry:
DR NCI
DR Group RE
CR BankYou will see the specifics of how to work the figures in the videos.
You then need to think about the ownership share in the workings, as now we own 65% and the NCI 35%. To do this we follow the usual calculations in both W4 and W5, including the adjustment above but then we simply use the new percentage ownership when looking at the post acquisition profits from the date of the change in ownership.
Hope that clears it up a bit fir you, it’s a tough area of the syllabus so don’t get too caught up in it.
Thanks
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