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PYQ – M/J 2021
Link to Question 3(b)
https://www.accaglobal.com/content/dam/ACCA_Global/Students/resourceFinder/SBR_INT_Mar_Jun%2021%20_q.pdfLink to Answer
https://www.accaglobal.com/content/dam/ACCA_Global/Students/resourceFinder/SBR_INT_Mar_Jun%2021%20_a.pdfThe answer given for the gain on disposal of Marlett (subsidiary) is $1.5m.
The formula given in the answer to calculate gain or loss on disposal in the separate financial statements is to recognise the difference between,
(i) FV of retained interest and any proceeds from disposing of a part of interest in associate or joint venture, and
(ii) the carrying amount of the investment at the date the equity method is discontinued.————
When I did this question, I used the formula of,
Sales proceed $10m
**Carrying amount of shares disposed ($9m)
(12m x 45/60)Gain on disposal of $1m
————
The answer by me is wrong. Is it because that I can only use the **formula if the question has given me the $12m as the original purchase consideration, instead of it as the carrying amount?
Afraid I don’t really understand what you did.
On disposal : Proceeds + FV of retained interest (of the 15%) – Existing carrying amount (of the 60%)= gain or loss
As when you sell a banana with a CA of 12 and in return receive an apple worth 3.5 and cash of 10
Never thought of it as a ‘formula’.
I saw this example given in the Kaplan textbook
Rock has held a 70% investment in Dog for two years. Goodwill has been calculated using the full goodwill method. There have been no goodwill impairments to date.
Rock disposes of all of its shares in Dog.
The following information has been provided:
Cost of investment 2000
Sales proceeds 3000Answer given:
Sales proceeds 3000
Cost of shares sold (2000)
Gain on disposal 1000My question is,
In this question, they deducted the original purchase consideration but in the exam question they deducted the full carrying amount of the subsidiary at the disposal date?Profit in the parent’s books = deduct the original purchase consideration
Profit in the group books = deduct the carrying amount of the subsidiary (NA + GW etc)
Yes, that’s what I thought but in this question, they specifically asked for the gain or loss in the SEPARATE financial statements
So, I wonder why the ‘formula’ as shown in the Kaplan textbook wouldn’t work for this question
Can’t help any more – ‘separate’ is not a word that I would use – unclear what it might mean.
I would move on. 🙂
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