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Hello
I’m doing the June 2015 exam paper and in the MCQ5 I have a query. In the calculation of the NCI the fair value adjustment of the net assets is ignored completely. Can you please help me on why this is done?
Thanks in advance
SiaBecause we’re told the value of the nci at the date of acquisition! It’s 20,000 shares @ $2.50 = $50,000 and the nci share of the post acquisition retained earnings is 20% x 9/12 x $40,000 = $6,000
Add that to the value at date of acquisition and there’s your answer
OK?
Hi Mike
Thanks for your prompt answer. I’m given the value of the nci at the date of acquisition but I’m not clear how should I understand that the fair value adjustment is already included in that value. From the below statement?
“The only fair value adjustment required to Sact’s net assets on consolidation was $20,000 increase in the value of its land”
Thanks in advance
Because, as I’ve already told you(!), “we’re told the value of the nci at the date of acquisition! It’s 20,000 shares @ $2.50 = $50,000”
If the question tells you that the nci value is calculated as the number of shares held by the nci multiplied by share price as on the date of acquisition then it’s correct to assume that the examiner has not made a mistake and he is in fact correct! The share price is calculated as the number of shares owned multiplied by the share price as on the date of acquisition!
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