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Sep. DEC 2016 sample question on acca website
Zippy disposed 20% interest in Ginny reducing their interest to 40% from 60%. This means zinny has lost control. My question is why did the answer still consolidate Ginny? Was another form or control in the question I’m missing?
Hi,
The reporting date is 30 June’16 and we are preparing a groups statement of profit or loss. Remember this financial statement shows the results for the twelve month period and for part of that period (9 months) we will have had control and for the remaining part of it (3 months) we will not have had control.
For the 9 months we will need to consolidate the results, so pro-rate the revenues and costs, and determine the NCI based upon the pro-rated profits using the 40% NCI.
For the final 3 months, following the disposal of the shares which takes us to a 40% holding we will now equity account as we have significant influence. So we show our share (40%) of the profits for the 3 months on one line, ‘share of profit of associate’. We would also need to calculate a profit on disposal as we no longer have control.
Hope that helps.
Thanks
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