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Sir, just to write the inventory values more clearly:
Amount in inventory of Subsidiary at:
30/9/2006 ($’000) = 2,000 (closing)
30/9/2005 ($’000) = 1,200 (opening)Swati, what’s the matter with applying the logic, that I explained, to the revised figures you are now providing?
The brought forward (revised) provision is 25/125 x 1,200 = 240k and the carry forward is 25/125 x 2,000 = 400k
That gives a “missing” figure in the Provision T account of 160k on the credit side. Put in that missing figure to make the Provision T account balance and debit the 160k to the statement of profit or loss
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Dear Teacher.
I was following on the consolidated question with parent(Austra) and subsidery(Danuta) and I have question on how you have calculated the dividends; as per your working in Austra(Parent) you said,
Dividend is = 10c(100 shares in Austra and 20000 shares?) so where did you get this figure(the 20000) ? . in the question I have noticed that the only 20000 shares figure is the one which Austra paid for consideration to Danuta to acquire the 75%, hence if that is the answer, than isn’t that figure(20000) been deducted from Austra shares as we had not had more than 100 shares in Austra equity at the first place(Ref as per question)?..
Please Help.
ThanksThere is no reason why Ausra can not issue as many shares as the directors choose to. They could choose to issue trillions and gazillions of shares – no limit.
Upon the acquisition of Danute the directors of Ausra persuaded the former shareholders of Danute to accept shares, cash and deferred cash – no problem
OK?
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yes, no problem, and than?
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I mean, I dont have problem with the forms of considerations paid by Austra to acquire Danuta(75%) but what I am asking how you calculated Austra’s dividents?
In the calculation of the dividends, when you added the 20000 shares to 100000(Austra’s shares) does that mean former shareholders of Danuta also have some shares in Austra(of 20000shares) and for that sake they(former holders of Danuta) will have financial instruments in their individual account(SFP) and shall receive some dividends from their shares in Austra as they were issued 20000 shares for acquisition.
Hi
Do you own any shares? I do.
And I don’t prepare individual accounts (SFP) and I certainly don’t look on them as financial instruments and wonder should I be treating them under IFRS9 as revised 3 days ago.
Do you anyone at all who owns shares? If yes, ask them if they are correctly treating them within their financial statements as financial instruments
And then post me again if you’re not sure what’s happening
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Dear teacher.
unfortunately I don’t know such company who can give me an answer, but I am asking you as you are more professional than me, if the austra as issuer issued 20000 shares to Danuta(NCI) than why Danuta did not get the dividends that is paid by Austra(12000)?
because as per calculation you said:- dividends paid by Austra= 120,000*0.1=12000 USD , than who had austra paid to? if to the NCI than are we not adding this full amount in the calculation of NCI’s value in the CSFP.??? please if not explain to me, I am really stuck.
Oh dear, Muhdin! 🙁
When a company Ausra buys the shares of another company Danute, from whom does Ausra buy those shares?
The answer? The people that were shareholders in Danute before Ausra came along and offered to buy their investment in Danute from them
So now those people, instead of owning shares in Danute (because they have sold those shares to Ausra) now own some shares in Danute, and they have received a bit of cash and they have been promised a cash payment in 2 years’ time
It isn’t Danute that is receiving the shares in Ausra – it’s people like me and you (well, not you, but people like me) that used to have an investment in Danute and now we’ve swapped it for an investment in Ausra instead
Why do you thing Ausra is going to pay a dividend to the nci? Ausra is going to pay her dividend to the people that own shares in Ausra – and that includes some people that used to own shares in Danute but they sold those shares to Ausra
So when does the nci get any dividend? They get their dividend when Danute declares a dividend. Most of the Danute dividend will be paid to Ausra but some will be paid outside the group to those shareholders that didn’t want to accept Ausra’s offer and who decided to keep hold of their investment in Danute
Is that any clearer?
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Absolutely clear!!!!!!!!!!! thanks teacher………
You’re welcome – and don’t be embarrassed – it’s a common misconception by students with no experience of stocks and shares
🙂
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Still following on Austra/Danuta drama:- in the question the fair value of NCI is 1.3(just the second line of the question) and in your calculation u used $2.2…….looked through but did not get any answer?
I believe that you’re using the out-dated version of the notes. Look up the revised version. I’ve also recorded the answer to this question and right at the start of the recording I go through how to check that you are using the correct version. Check it out and follow the workings as I go through them!
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Yeah…….Thanks lot, that is absolutely right? thanks.
Just for future solving consol problems,,,,,,, the fair value adjustment for inventory was not adjusted in the consolidation process of the Austra and Danuta(100-50-5.8) as per your working because the inventory was sold at the end of the year at fair value and not in the closing inventory(based on my understanding), but in the retained earning you added the fair value adjustment to the retained earning of Danuta because the asset was sold at profit at the acquisition date….. therefore, what about if that inventory was in the stock at fair value at the end of the year……shall we treat them as the fair value adjustment for tangable assets ?
Sorry for all these questions, but just to lock some rules in my head….thanks
Your question relates to working W3 consolidated retained earnings.
In this working we are trying to establish how much of the subsidiary’s “now” retained earnings have been achieved subsequent to acquisition.
In simple terms, if we deduct from “today’s” retained earnings the retained earnings from “yesterday” that will tell me how much has been achieved between date of acquisition and consolidation date
Today’s retained earnings may still have some under-valued inventory in there from date of acquisition ( a fair value adjustment). If that is the case, then the top “half” of the working W3 will need to be adjusted to the extent of that over / under valued inventory
The bottom half of working W3 is a straight lift from working W2 Goodwill of the retained earnings at date of acquisition so that will not change by reason of the fact of wrongly valued inventory at consolidation date
Clear?
Now, think about this. At date of acquisition the inventory was undervalued by (from memory) $12,000
You are asking “What if some of that inventory were still unsold?”
May I suggest that the unsold inventory should be written off to $nil? It’s 2 years since acquisition and, unless it’s inventory like whisky that improves with age, the marketability of 2 year old inventory would need to be closely considered!
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