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Group retained earning calculation and NCI.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Group retained earning calculation and NCI.

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 13, 2017 at 8:05 am #415491
    noman0409
    Participant
    • Topics: 16
    • Replies: 15
    • ☆

    Why the post acquisition revaluation surplus of $600 at year end is not included in calculation of Subtrak’s retained earning? However, NCI calculation include their share of revaluation surplus?
    (Please answer as soon as possible)

    Retained earnings Plastik Subtrak

    Per question Parent: 6,300 Subsidiary:3,500
    Less: pre-acquisition(1,500 + (2,000 × 3/12)) (2,000)
    Goodwill impairment (500)
    Unwinding of discount on deferred consideration (1,800
    (a) × 10% × 9/12) (135)
    Depreciation on FVA (100)
    PURP (600,000 × 25/125) (120)
    Total Parent:6,045 Subsidiary: 900
    Share of Parent in sbusidiary (900 × 80%) 720
    Total Group R.E: 6,765

    Non-controlling interest
    NCI at acquisition 4,500
    Share of post-acquisition retained earnings (900 × 20%) 180
    Share of property revaluation gain (600 × 20%) 120
    NCI Total 4,800

    November 13, 2017 at 9:20 am #415496
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    “(Please answer as soon as possible)” !!!!!!!

    I ALWAYS answer as soon as possible so your request does not sit nicely with me 🙁

    Does the answer not show a separate line entry for a Revaluation Reserve? therefore keeping revaluations separate from retained earnings … as you would need to do in practice

    In practice this is important because(for public entities) retained earnings qualify for the title of “Distributable Profits” whereas a Revaluation Reserve is non-distributable

    OK?

    Please respond as soon as possible!

    November 13, 2017 at 10:25 am #415516
    noman0409
    Participant
    • Topics: 16
    • Replies: 15
    • ☆

    *SORRY FOR WRITING AS SOON AS POSSIBLE”

    In Consolidated statement of Profit or loss, total revaluation gain is 2100 (1500 of parent as given in question and 600 for subsidiary revaluation surplus at year end.
    Following is part of question
    “At the date of acquisition, the fair values of Subtrak’s assets and liabilities were equal to their carrying amounts with the exception of Subtrak’s property which had a fair value of $4 million above its carrying amount. For consolidation purposes, this led to an increase in depreciation charges (in cost of sales) of $100,000 in the post-acquisition period to 30 September 20X4. Subtrak has not incorporated the fair value property increase into its entity financial statements.

    The policy of the Plastik group is to revalue all properties to fair value at each year end. On 30 September 20X4, the increase in Plastik’s property has already been recorded, however, a further increase of $600,000 in the value of Subtrak’s property since its value at acquisition and 30 September 20X4 has not been recorded.”

    But as per workings of solution for finding group retained earning and NCI, this 600000 is not added in calculation of subsidiary retained earnings. If this 600000 is added to subsidiary R.E, so this would change group retained earnings?

    November 13, 2017 at 11:18 am #415537
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    “But as per workings of solution for finding group retained earning and NCI, this 600000 is not added in calculation of subsidiary retained earnings. If this 600000 is added to subsidiary R.E, so this would change group retained earnings?”

    I’ve already told you that this 600 revaluation increase is reflected in the separate line called Revaluation Reserve

    Here’s an extract from the printed solution …

    “Revaluation surplus (2,000 + (600 x 80%)) 2,480”

    OK?

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