Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › december 2011 past question paper
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- October 20, 2015 at 1:58 pm #277830
in the suggested answers, (working 3) they have indicated unrecognized NCI (20%) for captive as they are calculating Impairment of goodwill. am failing to figure out how they are coming up with it..please help me understand
October 20, 2015 at 2:15 pm #277833Without me looking up the question and answer, let me see if I can guess.
Is the nci valued on a proportionate basis? In which case, no goodwill is attributable to them
But if goodwill WERE attributable to them, how much would it be
I’m guessing that it’s 20% where the parent’s goodwill is 80%
So notional goodwill for the nci is one quarter of the parent’s share of goodwill (20%/80%)
There is an article about this by the examiner some 2 years ago (from memory) but I fail to appreciate properly the points that the examiner is making. For example he has the cost of a 60% acquisition by the parent as say $300,000 and the value of the remaining 40% held by nci as say $350,000
This scenario is irreconcilable in my mind – that a 40% holding should be valued at greater than the cost of 60%!
For that reason I have pretty much discounted the scenario as improbable.
Fortunately the situation rarely appears in the exam given that most (if not all) ncis are valued on a fair value basis
Does that answer it or am I barking up the wrong tree?
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