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Consolidation of a foreign subsidiary

Forums › ACCA Forums › ACCA SBR Strategic Business Reporting Forums › Consolidation of a foreign subsidiary

  • This topic has 2 replies, 3 voices, and was last updated 12 years ago by wilson63.
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  • April 20, 2013 at 12:39 pm #122964
    acca1974
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    2 questions:
    Firstly, if calculating goodwill on a full basis, do you calculate the exchange difference on the total figure for goodwill then take the NCI% and group% from this total (option a) or should you work out the exchange difference for the group goodwill and NCI goodwill separately based on their goodwill amount (option B) ? example:
    cost of investment 40000 euros, FV of NCI at acquistion 7500 euros, net assets at acquistion 30000 euros
    full goodwill 17500 euros translated at closing rate (5) = $3500
    parents (80%) share of gwill 16000 euros @ CR (5) = $3200
    NCI (20%) share of gwill 1500 euros @ CR (5) = $300
    17500 euros at opening rate (4) = $4375 making exchange loss of $875
    Group share of exc. loss £700, NCI share $175 (option a)

    or Group 16000 euros @ opening rate (4) = $4000 less $3200 therefore exchange loss of $800 and NCI 1500 euros @ OR = £375 less $300 giving exchange loss of $75 (option b)

    Secondly, workings for NCI:
    1. NCI at acquistion at opening rate + NCI share of post acq profits for the year at average rate

    or

    2. NCI at acquisition + NCI share of post acq profits both at closing rate

    Thanks in advance

    May 4, 2013 at 1:49 pm #124515
    fidget
    Member
    • Topics: 8
    • Replies: 207
    • ☆☆☆

    For the full goodwill calculation, only the exchange gain/loss on retranslation is apportioned between Group & NCI. The total goodwill at the closing rate goes in the SOFP. If goodwill is impaired, then the amount of the impairment is translated at the average rate in your exchange gain/loss calculation.

    For the NCI, FV at rate at acquisition + post acq share retained earnings at average rate.

    May 7, 2013 at 6:06 pm #124812
    wilson63
    Member
    • Topics: 0
    • Replies: 6
    • ☆

    there will be an excgange difference on the retranslation of the goodwill – and that has to be split between the parent and the NCI in the normal proportion that they share profits and losses
    The best book on this area is Tom Clendon’s “A student’s guide to group accounts”

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