Calculation of Goodwill and NCI (Example 1 – Vertical group structure)

Please, examine the following alternative solution. There’s a little confusion in regard to calculation of Goodwill and NCI. (If needed, I can mail excel file of this solution via kajithebe2000@gmail.com)

Solution:
a. Analysis of Net Assets of Russell
Particulars At acquision date Post Acquisition Total
Share Capital 40,000.00 – 40,000.00
Retained Earnings 20,000.00 25,000.00 45,000.00
Total 60,000.00 25,000.00 85,000.00
NCI @30% (or Given) 20,000.00 7,500.00
Gayle (BF) 40,000.00 17,500.00

b. Analysis of Net Assets of Gayle
Particulars At acquision date Post Acquisition Total
Share Capital 50,000.00 – 50,000.00
Retained Earnings 40,000.00 35,000.00 75,000.00
Total 90,000.00 35,000.00 125,000.00
Add: Transfer from Russell – 17,500.00
Total 90,000.00 52,500.00
NCI @20% (or Given) 25,000.00 10,500.00
Bravo (BF) 65,000.00 42,000.00

c. Calculation of Goodwill
Fair value of consideration (74,000+55,000) 129,000.00
Less: Fair value of net assets @ acq. Attributable of parents
(40,000 + 65,000 from W a & W b) 105,000.00
Goodwill 24,000.00

OR

Fair value of consideration (74,000+55,000) 129,000.00
Add: Fair value of NCI @acq date 45,000.00
Less: Fair value of net assets @ acq. 150,000.00
Goodwill 24,000.00

d. Calculation of NCI @ year end
NCI @ acquisition date (W a + W b) 45,000.00
Add: Post acquisition profit (7,500+10,500) 18,000.00
NCI @ year end 63,000.00

e. Calculation of group retained earning
Bravo 65,000.00
Add: PAP (W b) 42,000.00
Total 107,000.00

Statement of Financial Position
Particulars Amount
Non-current Assets 213,000.00
Goodwill (W c) 24,000.00
Current Assets 121,000.00
Total 358,000.00

Share Capital 100,000.00
Retained Earning (W e) 107,000.00
NCI (W d) 63,000.00
Non-current liabilities 39,000.00
Current liabilities 49,000.00
Total 358,000.00