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If parent company “P” acquired 70% in “S1” and 10% in sub-subsudiary “S2” (S1 acquired 80% S2), effective interest rate is 66% (10% direct and 56% indirect through S1)
QUESTION 1
When we are calculating goodwill, consideration transferred is 70% of amount paid by S1. What happens to the amount paid by P to acquire the 10% of S2?QUESTION 2
NCI @ acquisition for S2 is at 44% or at 34%?Hi,
In calculating the goodwill you’re correct with regards the 70% of the amount paid by S1. We then add the amount paid to acquire the 10% holding that P has bought in S2. There is no requirement to adjust this figure for the percentage acquired because P’s shareholders fully own the 10% investment.
The NCI is 34% as we effectively own 66% so the NCI own the remainder.
Hope this helps.
Thanks
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