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Hi,
Was wondering about how to calculate the gain/loss on acquisition/disposal of interest when control is still retained. I know its a movement in shareholder’s equity (OCI) and should be the difference between the sales proceeds and change in NCI (which represents the value of the interest acquired/disposed of). However, I was doing the question 1 in the December 2009 P2 paper and I was a bit confused as to how they calculate the gain/loss (I went through the OT course notes but still am confused!).I understand the gain on the acquisition of Park as I got the same answer as the second alternative method the examiner used.
[“Alternatively the acquisition could have been calculated as consideration of $90m less 20% of net assets at second acquisition (20% x (net assets per question 414 + land fair value 5 + franchise fair value 10 less franchise amortisation 3)), resulting in a negative movement in equity of $4·8m. The NCI would therefore be $85·2 million.”]I thought we could just take the FV of net assets as the disposal/acquisition date and multiply that by the change in NCI % to get the change in NCI, but the answer does something else for Fence.. Please help, i’m so confused!
And one more question.
Referring to Question “Ashanthi” Q41 in the BPP revision kit,
How come when calculating the profit from Associate they use 30% even those it is the subsidiary who has 30%, and therefore the true effective control is 21%. Aren’t we supposed to use the parent’s effective control % ??Thanks!
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