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Consolidated Financial Statements – NCI

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Consolidated Financial Statements – NCI

  • This topic has 9 replies, 2 voices, and was last updated 9 years ago by MikeLittle.
Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
    Posts
  • August 17, 2015 at 2:25 pm #267515
    wyingjie
    Member
    • Topics: 4
    • Replies: 9
    • ☆

    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) $X

    In 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) $X

    August 17, 2015 at 4:45 pm #267531
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23317
    • ☆☆☆☆☆

    Where 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

    August 18, 2015 at 1:46 am #267589
    wyingjie
    Member
    • Topics: 4
    • Replies: 9
    • ☆

    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 $3,690,000

    However, 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?

    August 18, 2015 at 9:30 am #267606
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23317
    • ☆☆☆☆☆

    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 3,690

    Are you sure that you’re reading it correctly?

    August 18, 2015 at 2:51 pm #267650
    wyingjie
    Member
    • Topics: 4
    • Replies: 9
    • ☆

    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: $7,200

    NCI:
    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: $2,100

    Total 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 $3,690

    August 18, 2015 at 3:04 pm #267652
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23317
    • ☆☆☆☆☆

    Well!!!! That’s altogether a backward way to do the calculations! It’s certainly not the way that the ACCA publish as their official answers

    August 19, 2015 at 1:46 am #267698
    wyingjie
    Member
    • Topics: 4
    • Replies: 9
    • ☆

    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.

    August 19, 2015 at 7:23 am #267713
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23317
    • ☆☆☆☆☆

    …..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?

    August 20, 2015 at 1:49 am #267821
    wyingjie
    Member
    • Topics: 4
    • Replies: 9
    • ☆

    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.

    August 20, 2015 at 7:52 am #267839
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23317
    • ☆☆☆☆☆

    Just glad that I’ve sorted it out (I think)!

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