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Consolidated SOPL BPP EXAM KIT Q 270

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Consolidated SOPL BPP EXAM KIT Q 270

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 25, 2024 at 5:01 am #705963
    aamna808
    Participant
    • Topics: 24
    • Replies: 9
    • ☆

    Wiley acquired 80% of Coyote on 1 January 20X8. At the date of acquisition Coyote had a building which had a fair value $22 million and a carrying amount of $20 million. The remaining useful life was 20 years.

    Coyote’s profit for the year to 30 June 20X8 was $1.6 million which accrued evenly throughout the year.

    Wiley measures non-controlling interest at fair value. At 30 June 20X8 it estimated that goodwill in Coyote was impaired by $500,000.

    What is the total comprehensive income attributable to the non-controlling interest at 30 June 20X8?

    A $40,000
    B $50,000
    C $187,500
    D $150,000

    Correct answer is $50,000

    My question is shouldn’t ‘total comprehensive income’ include both profit for the year and other comprehensive income? I took 20% of the revaluation surplus of $2m and added it to the total comprehensive figure.
    My calculation was:
    revaluation surplus = $2m x 20% = $400,000
    excess depreciation = $2m/20 x 6/12 / 20% = $10,000
    post acq profit = $1.6m/12 x 6 x20% = $160,000
    impairment attributable to NCI = $500,000 x 20% = $100,000

    total comprehensive income= $160,000 + $400,000 – $10,000 – $100,000
    = $450,000

    I don’t understand as to why we do not include the revaluation surplus working in our calculation? Please let me know! Thanks in advance!

    May 25, 2024 at 7:45 am #705967
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    The increase in the value of the building is not a revaluation under IAS 16, so there is no revaluation gain in OCI. It is a fair value adjustment on acquisition of a subsidiary that is dealt with under IFRS 3. The adjustment in this instance is dealt with through the goodwill on acquisition calculation.

    Thanks

    May 25, 2024 at 3:50 pm #706012
    aamna808
    Participant
    • Topics: 24
    • Replies: 9
    • ☆

    Hello! Thank you so much for answering! I missed that point completely, my bad! So, basically any revaluation of the net assets of subsidiary that takes place at the date of acquisition needs to be dealt with as a fair value adjustment in goodwill calculation, taking any excess depreciation charged to COS/Reserves. I also am a bit confused as to why we calculate excess depreciation, and not depreciation on the revalued amount? Is it because we have to cancel the previous depreciation charged on the asset prior to revaluation?

    June 1, 2024 at 10:39 am #706368
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Your understanding of the adjustments to the net assets and the additional depreciation is correct, and is commonly seen in exams so a good adjustment to be aware of.

    The reason why it is the excess depreciation is because the subsidiary will already have charged depreciation on the amounts held in their books, so we just need to account for the difference caused by the adjustment to fair value.

    Thanks

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