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1. Hello Sir, please when there is a share exchange and I’m given the Parent’s share price and the Subsidiary’s share price as well, which of the share prices is correct to use? So, by default, which share price should I always use to value share exchange?
2. Please if a subsidiary paid dividend, is it correct to deduct it from the Group Retained Earnings? In any case, can you throw some light on it?
To answer your queries:
1) S’s share price is used to help calculate the NCI at acquisition under the FV method where we multiply the number of NCI shares by S’s share price. P’s share price is used to value the share consideration as part of the acquisition cost where the number of P shares issued is multiplied by P’s share price.
2) If S has declared/paid a dividend that has not been accounted for then it would be deducted from the group retained earning. If it has already been accounted for then we do not need to make an adjustment as it has already been adjusted for within the group retained earnings.