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Hi Tutor,
For the calculation of NCI, could you advise for F3, why NCI’s Share of Post-Acquisition Reserves were added whereas for F7, NCI’s Share of Goodwill were added instead.
In F3, the working is:
Fair Value of NCI at acquisition date $X
Add: NCI’s Share of Post-Acquisition Reserves $X
Less: Impairment of goodwill (if any) $XIn F7, the working is:
Fair Value of NCI at acquisition date $X
Add: NCI’s Share of Goodwill $X
Less: Impairment of goodwill (if any) $XWhere have you found that?!!!!!!!!
Please tell me that I NEVER, NEVER, EVER said that second line “Nci’s share of goodwill”
Please tell me that that doesn’t appear in the course notes nor have you heard it in the recordings
And please tell me TODAY because I shall not sleep tonight from worry
Hi Mike,
Could you refer to F7 past exam on Dec 2010 Q1 (Premier)?
In Kaplan lecturer’s workings, NCI’s share of goodwill was added, i.e. $2,100,000.
Fair Value of NCI at acquisition date $1,590,000
Add: NCI’s Share of Goodwill $2,100,000
Hence, NCI in consol SFP is $3,690,000However, Post-acqusition reserves after fair value adjustments was $950,000.
Why was NCI’s Share of Goodwill added instead of NCI’s Share of Post-acquisition Reserves in this case? Did I miss anything?
This confuses me! My version of the official solution says:
Working vi
Non controlling interest in statement of financial position
At date of acquisition 3,500
Post acquisition profit from income statement 190
Total 3,690Are you sure that you’re reading it correctly?
I’m read it correctly. The NCI answer is still correct.
Workings from Kaplan’s lecture notes are as follow (Values in $’000):
To find Goodwill –
Parent:
Cost of Investment $12,800
Less: Fair Value of Net Assets of Subsidiary at date of acquisition $5,600 ($7000 x 80%)
Parent’s Share of Goodwill: $7,200NCI:
Cost of Investment $3,500 ($5000 x 20% x $3.50)
Less: Fair Value of Net Assets of Subsidiary at date of acquisition $1,400 ($7000 x 20%)
NCI’s Share of Goodwill: $2,100Total Goodwill: $9,300 (Consol SFP)
NCI Working:
Fair Value of NCI at acquisition date $1,590 ($7,950 x 20%)
Add: NCI’s Share of Goodwill $2,100
NCI in Consol SFP is $3,690Well!!!! That’s altogether a backward way to do the calculations! It’s certainly not the way that the ACCA publish as their official answers
Will ACCA award marks for this backward calculations? This was Kaplan’s F7 method. However, in F3, Kaplan added NCI’s Share of Post-Acquisition Reserves.
…..and didn’t add nci’s share of goodwill!
Ah! Now I’ve looked again to try to figure out what they’ve done (and I believe that you have used the wrong word on one occasion (or they have and you’ve copied their wrong word)) I think I understand
In the post before this last one, you have typed in the nci working “Fair value of NCI at acquisition date $1,590 ($7,950 x 20%) Add NCI’s Share of Goodwill $2,100”
NCI’s proportionate share of fair valued net assets at date of acquisition was surely 20% of $7,000 = $1,400 and NOT $1,590 as you have written. You should have written “…..at date of consolidation” and not “…..at date of acquisition”
At date of consolidation, the NCI’s share of fair valued net assets was 20% of $7,950. Now, that figure equates to the NCI share of net assets at date of acquisition $1,400 plus the NCI share of post acquisition retained earnings in the subsidiary $190
Attacking the issue from this angle, the only further matter to add is the NCI goodwill in so far as it hasn’t been impaired and this figure is $2,100
I don’t think that I have ever seen a question that asks you to calculate the NCI goodwill. I show students on the screen in lectures that it is possible to calculate the figure, but I’ve never seen it asked for in an exam question
Yes, this is one way of calculating the NCI as at consolidation date and, in fact, until about 4 years ago, it was the method I taught.
“Their share of subsidiary net assets at consolidation date, +
Their share of goodwill, –
Any impairment of their goodwill”
Nowadays, I go down this road:
“Value at date of acquisition, +
Their share of post-acq retained, –
Their share of goodwill impairment”
Ok now?
Hi Mike, thank you for the clarifications 🙂
I copied Kaplan’s answer word for word and the F7 lecturer indeed put “fair valued of net assets at date of acquisition” instead of “…..at date of consolidation” for all the workings for the other questions. I guessed we were too confused on how to ask the lecturer.
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