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wil the adjustment to parent equity calculated in respect of net assets basis and in respect of NCI basis give two different figures?
can i know which basis is best in which situation?
While you’re waiting for the tutor to reply, can I offer my thoughts, which might not be correct.
In a disposal where control is retained, the NCI is ‘eating’ into the net assets. Therefore the parent’s increase/decrease is calculated by fv of consideration received minus increase in NCI in net asserts.
In an acquisition where control is increased, the NCI is ‘eating’ into itself. Therefore the parent’s increase/decrease is calculated by the fv of consideration paid minus decrease in NCI.
I don’t know if that makes sense, or whether it’s correct, so I’d be interested in the tutor’s reply.
Hi,
It depends on if you are acquiring more shares in a subsidiary or disposing of shares in a subsidiary.
If you are acquiring more shares in a subsidiary then there is a reduction in the NCI and therefore we need to see by how much the NCI is reduced by. We therefore calculate the changes based on the NCI figure before the change in ownership (eating into itself as per the above).
If you are disposing of shares in a subsidiary then there is an increase in the NCI but this increase is coming from the net assets of the subsidiary. We therefore calculate the changes based on the net assets figure.
It is one the most challenging areas of the groups part of the syllabus, so just keep working the questions and it will become easier.
Thanks
@neilsolaris said:
While you’re waiting for the tutor to reply, can I offer my thoughts, which might not be correct.In a disposal where control is retained, the NCI is ‘eating’ into the net assets. Therefore the parent’s increase/decrease is calculated by fv of consideration received minus increase in NCI in net asserts.
In an acquisition where control is increased, the NCI is ‘eating’ into itself. Therefore the parent’s increase/decrease is calculated by the fv of consideration paid minus decrease in NCI.
I don’t know if that makes sense, or whether it’s correct, so I’d be interested in the tutor’s reply.
Hi
Thanks a lot for your kindness in replying to my doubt, I very well understood 🙂@P2-D2 said:
Hi,It depends on if you are acquiring more shares in a subsidiary or disposing of shares in a subsidiary.
If you are acquiring more shares in a subsidiary then there is a reduction in the NCI and therefore we need to see by how much the NCI is reduced by. We therefore calculate the changes based on the NCI figure before the change in ownership (eating into itself as per the above).
If you are disposing of shares in a subsidiary then there is an increase in the NCI but this increase is coming from the net assets of the subsidiary. We therefore calculate the changes based on the net assets figure.
It is one the most challenging areas of the groups part of the syllabus, so just keep working the questions and it will become easier.
Thanks
Thanks a lot OT P2-D2 too in confirming the reply given by neilsolaris 🙂
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