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Hi Mr Mike, it is very important part that i want to ask question and I want to understand it.
Mantas acquired 80% of the issued share capital of Rochas on 1 January, 2009. Their respective Statements of Comprehensive Income for the year ended 31 December, 2009 are as follows:
Mantas Rochas
$ $
Revenue 26,000 12,000
Cost of sales and expenses 10,000 7,000
Profit from operations 16,000 5,000
Dividend from subsidiary 2,000 –
Profit before tax 18,000 5,000
Income tax expense 6,000 1,500
Profit after tax 12,000 3,500
Dividends of $5,000 and $2,500 respectively have been proposed.Solution:
Revenue (26 + 12) 38,000
Cost of sales and expenses (10 + 7) 17,000
Profit before tax 21,000
Income tax expense (6 +1.5) 7,500
Profit after tax 13,500
* NCI 20% x 3,500=(700)
profit attributable to owner of parent(MANTAS)12,800
Dividend Mantas only (5,000)
=7,800
Proof M own 7,000 + M’s share of R’s post acq ret’d 80% × ”1,000” =800
7,800
Also where did you get ”1000”?Here is my question is that if we deduct Pco’s dividend pay(MANTAS) from profit attributable to owner of Mantas 12800-(5000)=7800
Why we do not deduct dividend pay by Sco (Rochas) 2500 by splitting it into percentage proportionate
NCI-700-500(2500*20%)=200
Parent 7800-2000(2500*80%)=5800
I really need a good explanation because when Sco pays dividend, share of dividend pay of Sco attributable to PCo is deducted only between companies'(PCo and Sco) investment income in consolidated profit and loss statement.
But in the finding of NCI like
Profit attributable to
owner of parent
NCI(this dividend pay is not deducted from NCI)-why?the question above that i say is the case that i faced when i solved question in BEcker.I solved the question but i did not deduct dividend pay by sco’s NCi share from NCI.“Why we do not deduct dividend pay by Sco (Rochas) 2500”
Because that dividend of $2,500 paid by Rochas has not been separately dealt with in the consolidated statement of profit or loss
When dealing with a subsidiary’s results for the year, we consolidate …
the subsidiary’s time apportioned, adjusted results down to profit after tax
But the subsidiary dividend has not been included anywhere in that subsidiary statement of profit or loss – it is shown as an appropriation of profits and is deducted from the subsidiary’s profit after tax to then leave us with the subsidiary retained earnings for the year
As for splitting it … we do!
When we allocate the nci share of the subsidiary’s results, we calculate their share of the subsidiary profit after tax
Say profit after tax was $10,000, the dividend was $2,000, retained earnings were $8,000 and the nci was 30%
In our calculations we allocate 30% of $10,000 to the nci
Can you see that that is the same as allocating their share of the dividend (30% x $2,000) plus their share of retained earnings (30% x $8,000)
“Also where did you get ”1000”?”
Rochas made profits of $3,500 and paid a dividend of $2,500
Where do you imagine I found the figure of $1,000 for retained earnings?
The calculation for the nci on the statement of financial position considers their share of retained earnings
The calculation for the nci on the statement of profit or loss considers their share of profit after tax
These two figures are NOT the same
The difference is the dividend so, when calculating the nci for the statement of financial position, you can (if you wish to do it this way) use their allocation of profit after tax of the subsidiary but then you must deduct their allocation of the subsidiary’s dividend
The easier approach is to take their allocation of retained earnings … but that’s only applicable for the statement of financial position
OK?
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