Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Gain or loss on disposal
- This topic has 1 reply, 2 voices, and was last updated 3 years ago by Stephen Widberg.
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- November 22, 2020 at 9:59 am #596035
Kutchen had purchased an 80% interest in Niche for $40 million on 1 January 20X6 when the
fair value of the identifiable net assets was $44 million. The partial goodwill method had been
used to calculate goodwill and an impairment of $2 million had arisen in the year ended 31
December 20X6. The holding in Niche was sold for $50 million on 31 December 20X6. The
carrying amount of Niche’s identifiable net assets other than goodwill was $60 million at the
date of sale. Kutchen had carried the investment in Niche at cost. The finance director
calculated that a gain arose of $2 million on the sale of Niche in the group financial
statements being the sale proceeds of $50 million less $48 million being their share of the
identifiable net assets at the date of sale (80% of $60 million). This was credited to retained earningsIn this scenario while calculating gain or loss on disposal they are not considering the value of NCI at disposal.could you please explain why?
November 23, 2020 at 8:25 am #596106Gain on disposal
Proceeds
Less (NA + GW – NCI)
So the Finance Director is wrong – if you calculate it using the above formula you will be right.
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