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Chapter 23 Practice question (2) Question1 Fair value of NCI

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Chapter 23 Practice question (2) Question1 Fair value of NCI

  • This topic has 3 replies, 3 voices, and was last updated 5 months ago by John Moffat.
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  • July 31, 2022 at 5:07 pm #662249
    Zaazou
    Participant
    • Topics: 10
    • Replies: 7
    • ☆

    Dear Sir,
    Hope you are keeping well, I would like to ask you a question to clear my doubt. So, for chapter 23 practice questions part 2 (Consolidated Statement of financial position) question 1. For the fair value of NCI, I took (10/90 x 21 600)= 2400. Is it a coincidence or we should absolutely take (10/100 x share capital of subsidiary to calculate fair value of NCI).
    Kind Regards,
    Zaazou

    August 1, 2022 at 7:56 am #662263
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    It is not a coincidence, but it is because the shares were acquired on incorporation.

    August 6, 2022 at 8:47 pm #662563
    Zaazou
    Participant
    • Topics: 10
    • Replies: 7
    • ☆

    So, to calculate the fair value of NCI,
    We calculate it like 10/90 ×21600
    Or 10/100 ×24 000?
    Can you tell me the formula of calculating the fair value of NCI ?
    lets say NCI is 10%
    We should take 10/90 multiply by which figures ? Is it retained earnings of S or share capital of S?
    I watched the lectures but im confusing since the figures are the same tht is the investment cost, share capital n retained earnings
    Thank you in advance for ur response

    August 7, 2022 at 9:36 am #662583
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    You should not learn things just as formula – it is too dangerous because the examiner is always trying to test your understanding.

    If they paid $21,600 for 90% of the shares, then the value of all of the shares must be 21,600 / 90%.

    So the value of the NCI’s shares must be 10% x 21,600/90%.

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